SINGAPORE - Oil prices fell in Asia Friday, cutting short a recent rally as investors weighed the potential for disruptions in Middle East supplies caused by the Yemen crisis and a global crude glut, analysts said.
US benchmark West Texas Intermediate for May delivery fell $1.02 to $50.41 and Brent crude for May eased 95 cents to $58.24 in afternoon trade.
Prices rose sharply over the previous two days after a Saudi Arabia-led coalition bombed Huthi Shiite rebels in support of Yemen’s embattled President Abedrabbo Mansour Hadi.
Yemen is bordered by key Middle East oil producers Saudi Arabia and Oman.
“The recent developments in Yemen have caused oil prices to jump on fears of disruption to supplies,” research house Capital Economics said in a market 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 said.
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 Friday as Hadi headed to an Arab summit to garner support as Shiite majority Iran warned the intervention was “dangerous”.
Powerful explosions rocked Sanaa soon after rebel leader Abdulmalik al-Huthi criticised the intervention as “unjustified” and called for supporters to confront the “criminal oppressive aggression”.
“The main concerns for the oil market seem to be that the direct involvement of Saudi Arabia and its allies in Yemen has raised the potential for a broader regional conflict with Iran, which backs the Huthi rebels, and that movements of oil through the Bab el-Mandeb Strait could be disrupted,” Capital Economics said.
Other analysts said the impact of the Yemen crisis on the oil market is being 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 fundamental and thus, find it extremely hard for current prices to persist,” Daniel Ang, an investment analyst with Phillip Futures in Singapore, said in a market note.