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US oil creeps higher in sluggish trade; Brent heads south

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U.S. crude oil edged up on Monday as traders moved to cover short positions amid expectations on further draws in domestic crude inventory stocks.

Brent was weaker but the markets were supported by a number of geopolitical risks carrying over from last week, including President Barack Obama's authorization for the first U.S. air strikes on Iraq since he pulled all troops out in 2011.

"The market is trying to price some geopolitical risk back in," said Gene McGillian, an analyst at Tradition Energy in Stamford. "We're essentially expecting falling WTI (U.S. crude) stockpiles and if it weren't for export demand for distillates on the product side, the market would be weaker."

U.S. crude ended up 43 cents higher, settling at $98.08 a barrel, while Brent crude fell 30 cents to under $105 a barrel.

Much of the movement was a result of traders trying to narrow Brent's premium over U.S. crude, which widened to as much as $8.10 on Thursday, the most since the end of June.

On the international front, Iraq's president asked the Shi'ite coalition's nominee for prime minister to form a government, challenging incumbent Nuri al-Maliki who has vowed to seek a third term.

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