BAGHDAD (Reuters) - A senior Iraqi official claimed Iranian soldiers crossed into Iraqi territory on Friday and took up position at a southern oilfield whose ownership is disputed by Iran, but Tehran denied the report. The Iraqi government demanded the immediate withdrawal of the Iranian troops. Iraq demands the immediate withdrawal from well No 4 and the Fakka oilfield, which belongs to Iraq. Iraq is looking for a peaceful and diplomatic settlement to this issue, said government spokesman Ali al-Dabbagh. Iraqi Deputy Interior Minister Ahmed Ali al-Khafaji earlier said the incursion was the latest in a series this week at the Fakka oilfield, around 300km southeast of Baghdad, in Maysan province. At 3:30 this afternoon, 11 Iranian (soldiers) infiltrated the Iran-Iraq border and took control of the oil well. They raised the Iranian flag, and they are still there until this moment, he told Reuters. Irans semi-official Mehr news agency later quoted the National Iranian Oil Company (NIOC) as rejecting the report. The company denies Iranian soldiers taking control of any oil well inside Iraqi territory, Mehr quoted the NIOC as saying. Khafaji said Baghdad had taken no military action and stressed it would seek a measured, diplomatic response to the situation. We are awaiting orders from our leader. This well is located on Iraqi land, 300 metres inside Iraq. It is disputed between Iran and Iraq. There was an agreement between the two countries oil ministers to fix this problem diplomatically, he said. An Iraqi security source in Maysan province, speaking on condition of anonymity, said Iranian troops had made their way on Thursday into the Fakka oilfield, just on the Iraqi side of the long desert border, then withdrawn after several hours. A senior engineer from Maysan Oil Company, which operates the field, said Iranian troops had taken temporary control of one of the fields seven wells, an inoperative well in a disputed border area, four or five times this year. Iranian forces come to this well periodically, and then at daybreak they withdraw. They are provoking us ... I dont know why this is a big deal this time, he said on condition of anonymity. The benchmark US light crude oil future moved to a high of $74.69 per barrel at 1414 GMT, up from $73.31 at 1108 GMT before the first reports, and was $73.46 at 1720 GMT. Ties between Iraq and Iran, which fought an eight-year war in the 1980s, have improved since a Shia-led government took over in Baghdad following the ousting of Sunni Arab leader Saddam Hussein in 2003. Yet tensions have flared in regions like eastern Maysan, just one of many flashpoints of continuing disagreement over shared borders between the majority Shia neighbours. The bilateral relationship is all the more delicate given Washington and Tehrans standoff over Irans nuclear programme and the presence of 115,000 US soldiers on Iraqi soil. Iraqi Interior Minister Jawad al-Bolani told al-Arabiya TV: Iraq will not give up its oil wealth, no matter the reason. With Bazargan and Abu Gharab, Fakka is part of the Maysan Fields, with an estimated 2.463 billion barrels of reserves. According Iraqs Oil Ministry, oil output in Fakka began in the 1970s but was suspended during the Iran-Iraq war. The Maysan engineer said output was now around 10,000 barrels per day and capacity was 20,000. Iraq offered the Maysan oilfield complex to global energy firms in its first post-war development contract auction in June. But a Chinese consortium, the sole group to bid on the fields, declined the Oil Ministrys proposal for fees.