Brent Steady Above $113 On Baiji Closing

Brent crude oil maintained its position above $113 on Wednesday morning as supply worries worsened due to the conflict in Iraq. According to Reuters, Baiji, the nation's largest refinery, was closed on Tuesday night as foreign oil companies evacuated their staff. Brent crude oil traded at $113.10 at 5:45 GMT on Wednesday as investors wondered if the unfolding crisis would cut down on the number two OPEC supplier's exports.

So far, Iraqi exports have been unaffected as most of the fighting has been confined to the northern part of the country. However, Sunni insurgents have been advancing in the direction of the nation's capital where military volunteers have been preparing to defend the Iraq from being dismembered.

Currently, oil prices are being driven by fear and possibility, but if Iraq's refineries and oilfields are overtaken by Islamic militant groups, some see the commodity's prices rising as high as $120.00 per barrel.

WTI was also buoyed by a report from the American Petroleum Institute which showed that US crude inventories decreased to 378.2 million barrels for the week ending on June 13^th. The 5.7 million barrel drop far surpassed estimates for a 650,000 barrel fall. Now, investors will be waiting for confirmation from the Energy Information Administration which is due to release its own version of the same data later on Wednesday.

Oil prices will also be dependent on the outcome of the US Federal Reserve's policy meeting which is set to finish up later on Wednesday. Most see the bank continuing with its current tapering schedule and reducing its monthly asset purchases by $10 billion. The focus will be on the bank's revised economic forecasts and any indication about the time line for an interest rate increase.