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Oil market climbs on Iran reports

Oil prices rose on Tuesday, reversing earlier losses on confusion surrounding reports that Iran had taken control of a container ship in the strategic Strait of Hormuz, dealers said.

[LONDON] Oil prices rose on Tuesday, reversing earlier losses on confusion surrounding reports that Iran had taken control of a container ship in the strategic Strait of Hormuz, dealers said.

New York's benchmark West Texas Intermediate for June delivery added just two cents to US$57.02 a barrel compared with Wednesday's closing level.

London's Brent North Sea crude for June gained 16 cents to US$64.99 a barrel in late afternoon deals.

"During the afternoon ... reports hit, and were later denied, of Iranian forces taking control of a US vessel," said IG analyst Chris Beauchamp.

"Oil prices moved higher thanks to the Iran news, but were unable to hold their gains." Iranian military ships fired across the bow of a Marshall Islands-flagged cargo vessel in the strategic Strait of Hormuz on Tuesday and forced it to head to Iranian territory, US officials said.

The cargo ship had last made a stop at the Red Sea port of Jeddah, on the Saudi Arabian coast, according to the website, and was sailing through the strait into Gulf waters.

It was unclear if the last port of call was related to the Iranian decision to take control of the container ship.

At about 0900 GMT, at least five ships from Tehran's elite Revolutionary Guards demanded that the Maersk Tigris, which had no Americans on board, head toward Iran's Larak Island, the Pentagon said.

The cargo ship's captain "declined" the demand and one of the Iranian vessels fired shots across its bow, Pentagon spokesman Colonel Steven Warren said.

The cargo ship, Warren said, then "complied with the Iranian demand and proceeded into Iranian waters in the vicinity of Larak Island." Members of the Revolutionary Guards boarded the cargo ship, which issued a distress call over an open radio channel.

The US military's Central Command heard the distress call and ordered a naval destroyer, the USS Farragut, to the area. US naval aircraft are monitoring, Warren said.

The confrontation came amid heightened tensions in the region as Saudi Arabia and its Gulf allies carry out air strikes in Yemen against Iranian-backed Huthi rebels.

The United States is providing intelligence and aerial refueling for the Saudi-led coalition.

Richard Mallinson, geopolitical analyst with consultancy Energy Aspects, said Tehran could be seeking to show "dissatisfaction".

"It could be some form of political statement that emphasises Iran's dissatisfaction against the Saudi coalition's activity," Mr Mallinson told AFP.

"We have in the past seen the Iranians take quite a strong stance when a small British naval vessel entered Iranian waters.

"If it's a cargo ship you would normally need some kind of additional reasons for the government coastal forces to board it.

"If they had suspicion it was involved in smuggling or that it was in some way either breaking international or Iranian law, then once it's in Iranian territorial waters that is down to (the) government how they react."

Almost one third of the world's traded oil passes through the narrow Hormuz strait, which connects the oil-rich Gulf to the Indian Ocean.

Earlier on Tuesday, the oil market had fallen after a Opec kingpin Saudi Arabia signalled that the world's top crude exporter has no intention of cutting output despite a global supply glut.

"We will supply any demand for Saudi oil, as we are interested in the stability of the market," said Prince Abdulaziz bin Salman, the deputy oil minister, according to Bloomberg News.


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