Oil up on U.S.-Iran scare, dollar; Saudi output stance cuts gains
By Barani Krishnan
NEW YORK (Reuters) - Oil prices rose 1 percent on Thursday on U.S.-Iran military tensions in the Gulf and speculation the dollar will fall on a monetary policy speech due from the U.S. Federal Reserve chair.
The market, however, gave back some gains after an interview by Saudi Arabia's energy minister with Reuters raised fresh doubts about a potential OPEC output freeze.
Crude futures rallied toward the close after a U.S. defense official said a U.S. Navy ship fired three warning shots after an Iranian fast-attack craft approached two U.S. ships in the northern Gulf on Wednesday.
The United States had reported on Wednesday another incident where it said Iranian vessels harassed a U.S. warship near the Strait of Hormuz earlier this week.
"These reports of confrontation between U.S. and Iranian vessels are giving cause again for oil markets to think about geopolitical tensions in the Middle East and what potential disruptions those could cause to oil traffic there," said Phil Flynn, analyst at the Price Futures Group in Chicago.
Earlier, oil prices rose on expectations that Friday's Fed policy speech in Jackson Hole, Wyoming by central bank Chair Janet Yellen would hint at further delays in U.S. rate hikes. The dollar weakened slightly on Thursday and could fall further on Friday, traders said, boosting prices of oil and other commodities denominated in the currency. [FRX/]
Brent crude futures LCOc1 settled up 62 cents, or 1.3 percent, at $49.67 a barrel.
U.S. crude's West Texas Intermediate (WTI) futures CLc1 rose 56 cents, or 1.2 percent, to settle at $47.33. Continued...