Brent crude hit a nine-month high of more than $115 a barrel on Thursday as the US said it could send military advisers to Iraq, raising concerns about the escalating conflict.

Government forces continued to battle Sunni militants for control of Iraq’s biggest refinery as US President Barack Obama said the US will send up to 300 military advisers to Iraq to combat the extremist insurgency, Reuters reported.

The Baiji refinery near Tikrit, 200 kilometres north of the Iraqi capital, remained under siege as troops loyal to the Shi’ite-led government held off insurgents from the Islamic State of Iraq and Syria (Isis) and its allies who stormed the perimeter, threatening national energy supplies.

If the 300,000-bpd refinery stays closed, Baghdad will need to import more oil products to meet its own domestic consumption, further tightening oil markets, Reuters said.

Brent rose 75 cents to $115.01 a barrel to settle at its highest since 9 September. It had reached a high of $115.71 earlier in the session.

The US crude oil futures contract for July, which expires on Friday, rose 46 cents to settle at $106.43. The price is now pushing towards a key resistance area at $106.75, according to Dwayne Pliska, a senior trading consultant at High Ground in Chicago, Illinois.

The spread between the two benchmarks widened to close at $9.01 from a spread of $8.67 the previous session, according to Reuters.

Obama said on Thursday the US will send military advisers to support Iraqi security forces and create joint operation centres in Baghdad and northern Iraq.

The US is prepared to make targeted air strikes in Iraq, he said, maintaining that ground troops would not be returning to the country.

Brent climbed towards $116 during Obama’s speech on Thursday, but pared gains as the market was expecting “more action” than what he proposed, analysts said.

In addition, fears over supply disruptions in Iraq might not be enough to support Brent prices further.

“I think we really need to see a disruption in supply before Brent can go higher,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

While fighting between Sunni militants and government-led forces continued north of Baghdad, the conflict had not yet spread to the country’s southern regions, where most of Iraq’s 3.3 million bpd of oil production is processed.

Uncertainty over potential export disruptions from Iraq has caused the spread between Brent and US crude oil to widen, causing a spike in the prices for gasoline and diesel. The Nymex contract for reformulated gasoline blendstock hit its highest intraday since July.

“So far the impact on Brent has been much greater that on WTI. You would expect it to be that way initially, but the two benchmarks usually come together. Instead, WTI is continuing to trade flat,” said James Williams, an energy economist at WTRG Economics in London, Arkansas. “That’s rather unusual because the market is behaving rather realistically. It’s reacting to fundamentals of supply and demand instead of threats.”

After the Iraqi conflict is resolved, the spread between Brent and WTI may fall to about $5 a barrel, said Richard Ilczyszyn, chief market strategist and founder of iitrader.com in Chicago. “The Iraq situation is probably going to be a short-term event in the scale of things,” he said. He said rising US supply would mute the impact of potential disruptions in Iraq.