- Oil held near $115 a barrel on Friday, close to a nine-month high, and was headed for its second weekly gain on increased risks of disruption to supply from due to fighting between government forces and Sunni rebels.
Oilfields south of , which export at least 2.5 million barrels per day (bpd) of oil, are unaffected. But the fighting in the north, and foreign oil firms beginning to pull out staff, pose a risk to supplies.
"The events unfolding in will continue to dictate the direction on the market and support the oil price for the time being at a high level," said , analyst at Commerzbank in .
Brent crude slipped 23 cents to $114.83 a barrel at 1343 GMT, after reaching $115.71 on Thursday, the highest since Sept. 9, 2013. U.S. crude was up 60 cents to $107.03.
Iraqi forces were massing north of on Friday, aiming to strike back at Sunni Islamists whose drive toward the capital has prompted the to send military advisers to stiffen government resistance.
The fighting in has highlighted how outages have put a squeeze on surplus oil production capacity. 's northern exports of about 300,000 bpd have been offline since March, while output has also been hit by unrest in fellow OPEC member nation , sanctions on Iran and oil theft in .
Brent has risen about 1.2 percent this week, after climbing 4.4 percent last week.
The , 200 km (130 miles) north of 's capital, was transformed into a battlefield, threatening 's domestic energy supplies.
Government forces appeared to be still holding out in the oil refinery, the country's largest, residents said.
Obama said he was prepared to take "targeted" military action later if deemed necessary. But he insisted that U.S. troops would not return to combat in .
The increased threat to supply in coincides with outages that are keeping almost 3 million bpd of global supply - equal to more than 3 percent of daily world demand - offline in countries including , , Iran and.