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Oil drops after Yemen-inspired gains
[LONDON] Oil prices fell on Friday after spiking the previous day as Saudi Arabian jets struck rebel targets in Yemen, sparking supply fears in the crude-rich Middle East.
Brent North Sea crude for delivery in May sank 63 cents to US$58.56 a barrel in London midday deals.
US benchmark West Texas Intermediate (WTI) for May slid 81 cents to US$50.62 a barrel.
"Oil prices ... are shedding some of the strong gains they had achieved over the two previous days," said Commerzbank analyst Carsten Fritsch.
"It would appear that the initial panicky response to Saudi Arabia's military intervention in Yemen is giving way to a more sober assessment of the situation."
Prices rose sharply on Wednesday and Thursday after a Saudi Arabia-led coalition bombed Huthi Shiite rebels in support of Yemen's embattled President Abedrabbo Mansour Hadi.
WTI struck a one-month high of US$52.48 and Brent jumped to a March 9 peak of US$59.78 on Thursday.
However, the market has since pulled lower owing to no disruption to oil supplies.
Yemen is bordered by key Middle East oil producers Saudi Arabia and Oman.
"Oil prices have cooled ... as the initial panic over the consequences of Saudi Arabia's military action in Yemen and the harm it might cause its oil distribution have failed to materialise," added analyst Alistair McCaig at traders IG.
Yemen has been gripped by turmoil since the Shiite rebels launched a power takeover in Sanaa in February.
Warplanes from the Saudi-led coalition kept up raids against Huthi Shiite rebels on Friday as Hadi headed to an Arab summit to garner support as Shiite majority Iran warned the intervention was "dangerous".
"The recent developments in Yemen have caused oil prices to jump on fears of disruption to supplies," said research house Capital Economics in a commentary.
There are concerns that an escalation of the conflict could disrupt oil shipments passing through the Bab el-Mandeb Strait, located between Yemen and Djibouti and through which about 3.8 million barrels of oil per day are transported, it added.
Other analysts said the impact of the Yemen crisis on the market was tempered by the crude oversupply, which has been fanned by record US stockpiles and the Opec cartel's refusal to slash production.
"Despite all this increase, we continue to see weak oil fundamentals and thus, find it extremely hard for current prices to persist," said Daniel Ang, an investment analyst with Phillip Futures in Singapore.