Oil under pressure as high supply offsets Mideast tensions, dollar

By Barani Krishnan

NEW YORK (Reuters) - Oil prices remained under pressure on Tuesday as worries about record high U.S. crude stockpiles offset security scares in the Middle East and support from a weak dollar.

Oil briefly 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.

The dollar's <.DXY> drop to an eight-week low lifted oil too. 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.

But Brent and U.S. crude gave back most, if not all their gains, by the close as players awaited latest inventory data from industry group the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT) .

Analysts polled forecast a build of 2.3 million barrels last week that would take U.S. supplies to a 16th straight week of record highs. The U.S. government will release official stockpiles data on Wednesday.

Brent , the more widely-used global oil benchmark, settled down 19 cents, or 0.3 percent, at $64.64 a barrel, after rallying to as high as $65.49.

U.S. crude finished up 7 cents at $57.06, after running to as high as $57.83.

Oil has gained around 20 percent this month for its 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.

(Additional reporting by Himanshu Ojha in London and Florence Tan and Jacob Gronholt-Pedersen in Singapore; Editing by Marguerita Choy and Chris Reese)