Oil Up On US-Iran Scare, Dollar; Saudi Output Stance Cuts Gains
NEW YORK, Aug 25 (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.
Brent crude futures settled up 62 cents, or 1.3 percent, at $49.67 a barrel.
U.S. crude's West Texas Intermediate (WTI) futures rose 56 cents, or 1.2 percent, to settle at $47.33.
Oil pared some gains after Saudi Energy Minister Khalid Al-Falih told Reuters he did not believe any significant oil market intervention was necessary as demand for crude was "picking up nicely" around the world.
The Organization of the Petroleum Exporting Countries and other oil producers, as well as consumers, are to meet in Algeria on Sept. 26-28 on the sidelines of the International Energy Forum. Speculation has been rife that the meeting will agree to some sort of output curbs, after a similar effort for a production freeze failed in April.
Al-Falih said there had been no "discussions of substance yet" on OPEC production levels.
His comments reinforced the belief of many market participants that the September meeting will not resort to any production curbs, especially with recent data showing the Saudis and fellow OPEC member Iran were pumping as much as they could.
"OPEC is producing at record high levels and the market is paying them to do it, with the way prices have risen today despite what the Saudi minister said," said Tariq Zahir, crude trader at Tyche Capital Advisors in New York.
(Additional reporting by Devika Krishna Kumar in New York, Christopher Johnson in London and Henning Gloystein in Singapore; editing by Nick Zieminski and Tom Brown)
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