Oil up, eyes Iran after Bernanke vague on stimulus

(Reuters) - Oil prices turned higher on Tuesday in choppy trade after initially trading lower when U.S. Federal Reserve Chairman Ben Bernanke did not trumpet a fresh round of monetary stimulus in testimony to a Senate committee.

Both Brent and U.S. crude bounced back as uncertainty and tensions involving Iran's dispute with the West over Tehran's nuclear program, along with recent North Sea supply interruptions, provided support to oil.

Bernanke repeated the Fed's pledge to act if needed, even while offering no new clues on when or how the central bank might offer extra support to the U.S. economy.

Financial markets had hoped for signs the Fed was moving closer to a third round of bond purchases, also known as quantitative easing or QE3.

"It's post-Bernanke buying because, while he was not explicit about doing something, the door is clearly open," said John Kilduff, partner at Again Capital LLC in New York.

The U.S. dollar rallied and equities initially fell back after Bernanke's testimony quelled hopes the Fed would take action after recent moves by central banks in China and Europe to bolster a sputtering global economy. .N

Brent September crude rose 80 cents to $104.17 a barrel by 1:50 p.m. EDT (1750 GMT), swinging from $102.77 to $104.75.

U.S. August crude was up 72 cents at $89.15 a barrel, having fallen to $87.41 and reaching the $89.46 intraday peak after the initial Bernanke-induced slump.

August crude options expire on Tuesday ahead of the August contract going off the board on Friday.

"The Iranian uncertainty and the North Sea problems are keeping oil supported, but I don't think those factors will last that long," said Mark Waggoner, president at Excel Futures Inc in Bend, Oregon.

Total crude trading volumes for Brent and U.S. futures neared a half million lots traded, but turnover lagged their 30-day averages.

U.S. heating oil futures bounced back up along with crude futures. But U.S. gasoline futures were nearly flat, having retreated after testing above the 200-day moving average.

SUPPLY TIGHTNESS

Production problems last week in the Buzzard field and an earlier strike by Norwegian oil workers are expected to push North Sea exports for 12 key grades to a 2012 low in August.

OPEC-member Angola's crude oil exports in September are set to fall by 300,000 barrels per day (bpd) to the lowest since June 2011, a preliminary loading schedule showed.

Weekly oil inventory reports are expected to show U.S. crude stockpiles fell last week, a Reuters poll of analysts on Monday showed.

Crude stocks fell substantially in the week to July 6, by 4.7 million barrels, according to the Energy Information Administration.

IRAN WILD CARD

With the European Union's embargo and tightening U.S.-led sanctions hampering exports and depriving Iran of revenue, China is increasing oil imports to a record high to help Tehran arrest its export slide, according to what Geneva-based consultancy Petrologistics said was a preliminary report.

U.S. Secretary of State Hillary Clinton said on Monday the United States and Israel were "on the same page" in their determination to prevent Iran from achieving what the West fears is its goal of building a nuclear weapon.

World powers and Iran have had several rounds of talks attempting to resolve the dispute.

Oil prices jumped on Monday in reaction to news that a U.S. Navy vessel off the United Arab Emirates fired on a fishing boat that did not heed warnings, reminding investors just how volatile the situation in the region can be.

(Additional reporting by Christopher Johnson in London and Manash Goswami in Singapore; Editing by Andrew Hay and Jim Marshall)