Iraq's army claimed Wednesday it had repelled an attack on the nation's largest oil refinery and killed 40 militants while the nation's prime minister provided an upbeat assessment on government gains in a nationally televised address to the war-weary nation.
Chief military spokesman Lt. Gen. Qassim al-Moussawi announced that government forces had retaken control of the Beiji refinery shortly after Reuters, citing unnamed security sources and refinery employees, reported that the refinery may largely be controlled by insurgents.
"The militants have managed to break in to the refinery. Now they are in control of the production units, administration building and four watch towers. This is 75% of the refinery," an official speaking from inside the refinery told Reuters. It was not clear why the official spoke on the condition of anonymity.
Prime Minister Nouri al-Maliki, however, assured the nation that his government has regained the initiative after the "shock" defeat of army and security forces in the country's north.
"We were able to contain the strike and arrest deterioration. … We have now started our counteroffensive, regaining the initiative and striking back," al-Maliki said.
Control of the nation's oil facilities are a key factor in maintaining control of the country. On Tuesday, the Beiji refinery was shut down and foreign workers were evacuated as Iraq security forces prepared for a raid of the compound by insurgents. The sprawling facility is situated about 50 miles north of Tikrit.
Crude oil prices did not immediately rise sharply on the news of the attack, which is taking place with mortars and machine guns, although they did move higher. The July crude oil futures contract added 29 cents to the barrel to $106.65.
Other clashes between Sunni Muslim militants from the al-Qaeda breakaway group known as the Islamic State of Iraq and the Levant — referred to as ISIL or ISIS — and security forces continued Wednesday in areas to the north of Iraq's capital Baghdad.
But if the Beiji refinery were to fall it could prove to be a dramatic new twist in the story and may have a big impact on supplies in Iraq and potentially across the world. Iraq is a major supplier of the world's oil.
"An increasing risk of supply outages in Iraq comes against a backdrop of an already tight global demand/supply balance that has markets already on edge," IHS energy experts wrote in a recent note.