Oil glut snuffs early rally on Mideast tension, dollar

NEW YORK — Oil prices remained under pressure on Tuesday, with Brent settling lower and US crude near flat, as worries about swollen US crude stockpiles cut price gains from an early rally on security scares in the Middle East and a weak dollar.

After an early rally, selling pressure grew as investors worried about record-high US stockpiles. After the market closed, the American Petroleum Institute ( API), an industry group, reported that US crude inventories rose to a record high for the 16th straight week.

US crude settled up 7 cents at $57.06, after running to as high as $57.83.

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

Earlier, oil had rallied as Iranian forces boarded the Marshall Islands- flagged MV Maersk

Tigris in the Gulf after firing warning shots across the bow. Saudi- owned Al Arabiya television initially said the vessel was a US ship. “Tensions are so high in that region with the impending Iran-US nuclear deal that any event implied to be US-linked has an immediate effect on oil prices,” said John Kilduff, partner at New York energy hedge fund Again Capital.

Jets from a Saudi-led alliance bombed the runway of Yemen’s Sanaa airport to prevent an Iranian plane from landing, Saudi Arabia said, as fighting across Yemen killed at least 30.

The dollar’s drop to an eightweek low also supported oil prices. The greenback slumped after a weak US consumer confidence report for April left investors cautious about a Federal Reserve meeting this week.

Oil has gained around 20% this month for its strongest recovery since the sell-off in oil between June and January. The rally has been tempered, however, by a stubborn global supply glut.

Feeding these fears, the API reported that US crude inventories rose by 4.2 million barrels last week, almost 2 million barrels more than forecast in a Reuters poll, to a record 485.4 million barrels.

Stocks at Cushing, Oklahoma, the delivery hub for US crude futures, fell by 162,000 barrels, cushioning some of the negative impact from the data.

“Amid all the bearish sentiment, the Cushing data provide a hope for bulls that storage tanks for US crude aren’t overflowing as yet,” said Phil Flynn, analyst at the Price Futures Group in Chicago.

“That’s what everyone will be watching for tomorrow,” he said of official stockpile data.