Oil prices pared losses after the U.S. Energy Information Administration reported that domestic crude stocks fell by 3.2 million barrels last week, bigger than analysts' forecast of a 2.2-million-barrel drop. Still, Both benchmarks were headed for their lowest session close since mid-June.
There have been repeated reports that ports would reopen and production increase, but analysts said the latest developments were likely to have more impact.
Brent, the North Sea benchmark, hit a nine-month intraday high of $115.71 two weeks ago on worries that a Sunni Islamist insurgency in northern Iraq would hit oil output and exports.
Prices have fallen steadily since then as oil facilities, mostly in southern Iraq, hundreds of kilometres from the fighting, have remained in operation. Iraq is OPEC's second-biggest producer and exporter and pumped 3 million bpd last month, a Reuters survey showed.
--By Reuters. For more information on commodities, please click here.