Investing.com -- Crude futures were mixed on Tuesday, as prices rebounded after falling in morning trading amid an erroneous report of a maritime conflict in the Strait of Hormuz.
Energy traders also await the release of the American Petroleum Institute's weekly inventory report later on Tuesday evening for a further gauge on supply levels.
On the New York Mercantile Exchange, WTI crude for June delivery settled at $57.07, up 0.08 or 0.14%. Earlier in U.S. morning trading WTI crude futures fell to a session-low of 56.16, as reports surfaced of a conflict off the coast of Southern Iran.
A patrol boat containing members from the Iran Revolutionary Guard reportedly fired shots at the M/V Maersk Tigris, after it crossed into Iranian territory on Tuesday morning before intercepting the Marshall Islands-flagged vessel, according to the Pentagon. While maritime laws allow innocent passage into the strait, much of the area is still located in Iranian territory. When the Iranian patrol ordered the commercial vessel deeper into Iran waters, the captain of the ship reportedly refused, prompting the firing of several rounds of shots. The ship then sent out a distressed call, according to NBC News, that caused the U.S. Navy to dispatch a destroyer – the U.S.S. Farragut and several planes to observe the situation.
Although the vessel remains under Iranian control, a Pentagon official told NBC News that there "probably is no military solution" to the issue and it remains a legal or diplomatic one that probably will not involve military intervention.
Hours later, Saudi Arabia reacted to reports of Iran's violation of a provisional no-fly zone by reportedly bombing an empty passenger jet at an airport in Yemen. The closure of the run is expected to delay delivery of aid packages and evacuations from the war-torn country.
It came after a report from the United Nations that the number of people that have been displaced from Yemen has exceeded 300,000, more than twice the previous estimates. The UN reportedly became close to brokering a deal between Saudi Arabia and a group of Shiite-led Houthi rebels last month, before talks collapsed amid a series of Saudi air strikes. More than 3,000 people in Yemen are feared dead from the month-long air campaign.
While Yemen is considered to be a minor exporter of crude, it is strategically located on the Bab el-Mandeb strait, one of the largest chokepoints of oil. Energy traders are also sensitive to any geopolitical risks involving Saudi Arabia, one of the world's largest crude exporters.
On the Intercontinental Exchange (ICE), brent crude for June delivery fell 0.21 or 0.32% to 64.62 a barrel. The spread between the international and U.S. domestic benchmarks for crude stood at $8.46.
Though traders will monitor inventory levels in Tuesday's API report, they may keep a closer eye on production which has fallen sharply in two consecutive weeks. Analysts also estimate that the Energy Information Administration will report a rise in crude stockpiles of 1.4 million for the week that ended April 24, when it releases its weekly inventory report on Wednesday. U.S. crude oil inventories reached 489.0 million barrels on April 17, the highest level in at least 80 years.