Gas and fuel supplies under threat

Violence in Iraq is pushing U.S. gas prices higher. Photo / AP

Heavy fighting was continuing around Iraq's main oil refinery in the city of Baiji, 400km north of Baghdad, where Islamists first tried to gain control last week.

The Iraqi Army said it had repelled an attack yesterday, killing 40 Isis fighters, but the claims could not be verified. Several tanks containing refined products reportedly caught fire.

Fighting at the plant could add to the mounting chaos, as it is one of Iraq's main providers of gasoline, cooking oil and fuel for power stations.

The assault further spooked international oil markets.

Prices for both benchmark oil exports - Brent crude and West Texas Intermediate - rose. However, Washington said it had not seen any major disruptions in Iraqi oil supplies as a result of the assault.

World oil producers have cautiously watched the unfolding chaos in Iraq, which exports around 2.5 million barrels of oil a day.

Iraq issued a public appeal for America to bomb the Isis "terrorists" rampaging through the country's northern region, a move that will pile pressure on Washington to take military action.

Speaking after another day of fierce clashes across the country, Hoshyar Zebari, the Foreign Minister, confirmed that Baghdad was formally seeking US air power in its fight against insurgents from the Islamic State of Iraq and the Levant. Until now the Iraqi Government had kept details of any such requests private.

US officials have said that while the Pentagon is willing to send special forces to help with intelligence gathering, air strikes would be of limited use against an enemy that is widely spread out and operating among civilian populations.

America's most respected military strategist said air power could lead the US to be seen to be siding with Iraq's Shia-dominated Government. David Petraeus said Iraq's Sunni minority now felt so disfranchised that they preferred Isis rule.