Oil prices diverge as market eyes Iraq crisis

World oil prices diverged on Tuesday, holding close to recent peaks amid ongoing concerns over violence in crude-producer Iraq.

US benchmark West Texas Intermediate (WTI) for August dipped 14 cents to close at $106.03 a barrel on the New York Mercantile Exchange.

In London, European benchmark Brent crude for delivery in August settled at $114.46 a barrel, a gain of 34 cents from Monday.

Both futures contracts fell Monday after striking nine-month peaks late last week on the back of the crisis, but on Tuesday there was a bit of profit taking in WTI, said Gene McGillian of Tradition Energy.

"After we tried to push through a nine-month high due to the all uncertainty in Iraq, we still have not seen supply disruption," said McGillian. "We are not shaking concerns about these areas -- we are treading water."

The head of OPEC on Tuesday said there was no oil supply shortage due to the crisis in Iraq, the cartel's second-largest exporter after Saudi Arabia, and that price increases were due to speculative trading.

"Right now the market is very well supplied," said OPEC Secretary General Abdullah El-Badri, on a visit to Brussels for talks with European Energy Commissioner Guenther Oettinger.

"There is no shortage on the oil market in any place in the world. Of course there is an uprising in Iraq but this has not affected the production area," El-Badri said.

Jihadist insurgents have captured swathes of Iraqi territory in a lightning offensive that began on June 9, but they have yet to directly threaten the key oil-producing region in the south.

McGillian said that Wednesday's weekly US oil inventories report was expected to show a decline in crude oil supplies but that it would not shake the market's attention "from the hot spots in the world unless we see a big build."

According to a Barclays survey of global investors released Tuesday, commodity investors are "very bullish" on the energy complex, with almost half thinking Brent prices will be $111-120 a barrel by the end of the third quarter.

"The main driver of energy prices in Q3 is expected to be geopolitical developments, whereas the most cited downside risk was a China slowdown," the report said.