By Barani Krishnan
NEW YORK (Reuters) - Oil prices seesawed on Tuesday as traders weighed security scares in the Middle East and support from a weak dollar against expectations that U.S. crude stockpiles have reached new record highs.
Both Brent and U.S. crude futures rallied as Iranian forces boarded the Marshall Islands-flagged MV Maersk Tigris in the Gulf after firing warning shots across the bow of the ship. Saudi-owned Al Arabiya television initially said the vessel was a U.S. ship.
"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," said John Kilduff, partner at New York energy hedge fund Again Capital.
Tensions were also fueled as jets from a Saudi-led alliance bombed the runway of Yemen's Sanaa airport to prevent an Iranian plane from landing there, Saudi Arabia said, as fighting across the country killed at least 30 people.
Oil prices also got a lift from the dollar's drop to an eight-week low. The greenback slumped after an unexpectedly weak U.S. consumer confidence report for April that left investors cautious about a Federal Reserve meeting this week.
Still, oil gave back most of its gains late in the day, wading in and out of negative territory, as players waited for data from industry group the American Petroleum Institute, expected to show a 16th week of record highs in U.S. crude stockpiles.
Brent
U.S. crude settled up 7 cents at $57.06 a barrel, after rallying to $57.83.
Brent and U.S. crude have gained around 20 percent this month for their strongest recovery since the selloff in oil between June and January.
The rally has been tempered, however, by data continuing to show higher supply than demand for oil.
(Additional reporting by Himanshu Ojha in London and Florence Tan and Jacob Gronholt-Pedersen in Singapore; Editing by Marguerita Choy and Chris Reese)
