NEW YORK--Oil futures slipped Monday as Iraq's oil production continued to be untouched by ongoing violence in the country.
Light, sweet crude for August delivery settled down 66 cents, or 0.6%, at $106.17 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange fell 69 cents, or 0.6%, to $114.12 a barrel.
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Oil prices have climbed to nine-month highs in the past week on concerns that an insurgency in Iraq could escalate and disrupt the nation's oil output, which is based in the south of the country. Iraq exported about 2.7 million barrels a day in May, according to the International Energy Agency.
A loss of that magnitude would sharply tighten the global supply-and-demand balance and could send prices much higher, analysts say.
For now, though, the insurgents are based in the north of the country, and Iraq is continuing to export oil.
U.S. Secretary of State John Kerry said Monday he received a commitment from Iraqi Prime Minister Nouri al-Maliki to begin forming the next national government in Baghdad by July 1.
"The market is kind of catching its breath after last week's strong rally," said Gene McGillian, broker and analyst at Tradition Energy in Stamford, Conn. "Without a supply disruption, I think the majority of the political risk has been priced in."
The biggest danger to Iraq's oil production is not that current output will be disrupted, but that continued uncertainty will prompt international oil companies to retreat from Iraq, lowering future production growth, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.
"At this juncture, there's no particular reason for oil prices to move that much higher or that much lower from the gains they've already made," Mr. Tchilinguirian said. "You would need a new event to provoke that kind of change."
Front-month July reformulated gasoline blendstock, or RBOB, settled down 2.01 cents, or 0.6%, at $3.1076 a gallon. July diesel fell 1.86 cents, or 0.6%, to $3.0326 a gallon.