Crude prices edged up after reports that Iran authorities had seized a cargo ship described by Saudi media as a US ship heightened geopolitical tensions and mounted concerns on the security of Middle East oil shipments.
Also supporting the price rally was a weaker dollar after prices dipped earlier on speculation that industry data due later on Tuesday would show another buildup in US stockpiles.
The commodity, however, partly retreated from these gains after the US government denied these reports and went on to clarify that Iran had boarded a Marshal island-flagged cargo ship in the Strait of Homuz.
“Tensions are so high in that region with the impending Iran-U.S. nuclear deal that any event implied to be U.S.-linked has an immediate effect on oil prices,” John Kilduff, partner at New York energy hedge fund Again Capital, told Reuters.
“That said, we are having a particularly choppy day today in oil with the dollar down on weak U.S. economic data that makes the chances for a Fed rate hike look even more remote.”
Light Sweet Crude oil for June delivery most recently advanced 10 cents or 0.12% to $57.75 a barrel on the New York Mercantile Exchange. The US benchmark had earlier touched highs of $57.84 the contract has not settled above $57.74 since November.
Brent for June delivery, the most widely used global benchmark, was most recently down 20 cents or 0.3% to $64.80 a barrel on the London-based ICE futures exchange.
The greenback was weaker against most major currencies as investors awaited the Federal Reserve’s policy meeting later in the day which concludes with a statement on Wednesday.
“U.S. dollar weakness is having a very bullish effect on oil,” Jason Rotman, president of Lido Isle Advisors, told MarketWatch.
“The potential for a dovish FOMC announcement [on Wednesday] could further increase oil prices,” said Rotman.
To contact the reporter of the story: Jonathan Millet at email@example.com