NEW YORK, June 17 (Reuters) - Brent oil held steady above $113 per barrel and U.S. crude weakened slightly on Tuesday as fears over oil supply disruptions from Iraq offset the possibility of increased supply due to a thawing of relations between Iran and the West.
Scores of Iraqis were killed on Tuesday during a battle for the provincial capital of Baquba as an uprising by Sunni insurgents continued to threaten the disintegration of Iraq. The fighting also shut the country's main oil refinery, starving parts of the country of fuel.
Islamic militants marching south towards Baghdad's Shi'ite-led government have seized towns in the north of the country in the past week. However, Iraq's oil refineries in the south, which process most of the country's 3.3 million barrels per day of oil production, have been unaffected so far.
Brent prices rose around 4 percent last week, the most since July last year, but the rally stalled after the Iraqi government tightened security around oil infrastructure.
"The market is going to be stable until there's more news about who is going to succeed," said Paul Smith, chief risk officer at Mobius Risk Group in Houston, Texas, referring to the conflict between Iraq's Shi'ite rulers and militants from the Islamic State of Iraq and the Levant.
Brent crude for August delivery gained 51 cents to settle at $113.45 per barrel.
U.S. July crude fell 54 cents to settle at $106.36 a barrel. The U.S. July contract expires on June 20.
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