Oil prices tick higher as U.S.-Iran tensions simmer

Oil prices clawed higher Tuesday, only mildly supported by underlying tensions between the U.S. and Iran that could further disrupt supply to the global market.

Oil market observers are looking ahead to the weekly U.S. petroleum inventory data from the American Petroleum Institute published later Tuesday, as well as official data from the Energy Information Administration on Wednesday.

Ahead of that data, U.S.-traded September West Texas Intermediate crude CLU8, +0.69% was up 38 cents, or 0.5%, at $68.27 a barrel. The contract is down some 5.8% so far this month.

September Brent crude LCOU8, +0.12% was up 15 cents, or 0.2%, at $73.20 a barrel. The global benchmark has moved in choppy trading so far this week, at one time pushing above $74 Monday, after logging its third straight weekly fall through Friday.

In addition to the supply watch, a firmer dollar DXY, -0.16% continues to act “as a drag on commodities, with gold back lower again and oil struggling for traction,” said Richard Perry, analyst at Hantec Markets.

Energy prices swung between gains and losses before closing lower Monday following threats between President Donald Trump and his Iranian counterpart, Hassan Rouhani, as the oil market tried to assess how much Iranian crude supply might be at risk.

Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions that are expected to hinder Iran’s oil industry. Analysts have estimated up to 1 million barrels a day of Iran’s more than 2.5 million barrels a day in crude exports could be at risk. Trump has vowed to impose the strictest sanctions possible.

After Trump withdrew from the nuclear accord in May, Brent temporarily breached the symbolic $80-a-barrel threshold for the first time in more than 3½ years.

“The market wants to get its head around the actual production in Iran” that will be affected by the renewed sanctions, said Ole Hansen, head of commodity strategy at Saxo Bank. “The market is playing it a little on the cool side.”

For one thing, oil prices have been tempered by rising supply from the Organization of the Petroleum Exporting Countries — led by Saudi Arabia — and producing allies like Russia following a decision in late June to begin ramping up output after more than a year of holding back production.

Elsewhere on Nymex, August gasoline RBQ8, +0.32%  tacked on 0.1% to $2.0945 a gallon, while August heating oil HOQ8, +0.43%  changed hands at $2.1285 a gallon, up nearly 0.5%. August natural gas NGQ18, +0.37%  rose 0.1% to $2.725 per million British thermal units.

—Christopher Alessi contributed to this article