Oil prices ease as market downplays supply threat from Yemen

Jim Cramer on What the Saudi Strikes on Yemen Mean for Oil Sector

(Reuters) - Oil prices fell over a percentage point on Friday as traders estimated that the threat of a disruption to world crude supplies from Saudi Arabia-led air strikes in Yemen was low.

Goldman Sachs said in an overnight note that the strikes in Yemen would have little effect on oil supplies as the country was only a small crude exporter and tankers could avoid passing its waters to reach their ports of destination.

Internationally traded Brent crude futures LCOc1 were trading at $58.44 a barrel at 0211 GMT, down 75 cents from their last settlement. U.S. crude CLc1 was down 88 cents at $50.55 a barrel.

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Oil prices ease as market downplays supply threat from Yemen
Yemenis inspect a destroyed building in Aden's suburbs on June 24, 2015 after rebel forces and loyalist fighters were locked in fierce fighting. Warplanes from the Saudi-led Arab coalition have launched heavy raids against rebel positions in seven Yemeni provinces, according to witnesses and military sources. AFP PHOTO / SALEH AL-OBEIDI (Photo credit should read SALEH AL-OBEIDI/AFP/Getty Images)
Smoke billows from the Faj Attan Hill following a reported airstrike by the Saudi-led coalition on an army arms depot, now under Huthi rebel control, on April 20, 2015, in Sanaa. The UN this week called the humanitarian crisis in Yemen one of the 'largest and most complex in the world'. AFP PHOTO / MOHAMMED HUWAIS (Photo credit should read MOHAMMED HUWAIS/AFP/Getty Images)
SANAA, YEMEN - MARCH 30: Shiite Houthis use anti-aircraft guns as the Saudi-led coalition strikes hit Houthi targets in Sanaa as part of the 'Decisive Storm' operation in Sanaa, Yemen on March 30, 2015. (Photo by Sinan Yiter/Anadolu Agency/Getty Images)
SANAA, YEMEN - MARCH 30: Shiite Houthis use anti-aircraft guns as the Saudi-led coalition strikes hit Houthi targets in Sanaa as part of the 'Decisive Storm' operation in Sanaa, Yemen on March 30, 2015. (Photo by Sinan Yiter/Anadolu Agency/Getty Images)
A Pakistani woman (R), evacuated from Yemen, is greeted by relative on her arrival in Benazir Bhutto International Airport in Islamabad on March 30, 2015. Pakistan evacuated more than 500 of its citizens from Yemen by jumbo jet and sent a naval frigate to rescue others stranded in the war-torn country, officials said. AFP PHOTO / FAROOQ NAEEM (Photo credit should read FAROOQ NAEEM/AFP/Getty Images)
SANAA, YEMEN - MARCH 30: Houthis attack Saudi-led coalition with anti-aircraft weapons after coalition carried out airstrikes in Sanaa, Yemen on March 30, 2015 as part of the 'Decisive Storm' operation against the Houthis. (Photo by Sinan Yiter/Anadolu Agency/Getty Images)
SANAA, YEMEN - MARCH 30: Houthis attack Saudi-led coalition with anti-aircraft weapons after coalition carried out airstrikes in Sanaa, Yemen on March 30, 2015 as part of the 'Decisive Storm' operation against the Houthis. (Photo by Sinan Yiter/Anadolu Agency/Getty Images)
SANAA, YEMEN - MARCH 27: Smoke rises after Saudi-led coalition carried out airstrike in Sanaa, Yemen on March 30, 2015 as part of the 'Decisive Storm' operation against the Houthis. (Photo by Sinan Yiter/Anadolu Agency/Getty Images)
SANAA, YEMEN - MARCH 27: Smoke rises after Saudi-led coalition carried out airstrike in Sanaa, Yemen on March 30, 2015 as part of the 'Decisive Storm' operation against the Houthis. (Photo by Sinan Yiter/Anadolu Agency/Getty Images)
SANAA, YEMEN - MARCH 26: Yemeni men search for survivors in rubble of buildings after airstrikes of a 10-member coalition of Gulf countries in Yemeni capital Sanaa on March 26, 2015. Saudi Arabia has launched military operations in Yemen, as part of a coalition of over 10 countries in response to a direct request from the legitimate government of Yemen, against the Shiite Houthi group, which seized capital Sanaa and several provinces. (Photo by Mohammed Hamoud/Anadolu Agency/Getty Images)
A Yemeni man sits in the rubble of his house in the Yemeni capital on March 26, 2015 after Saudi air strikes against Huthi rebels near Sanaa Airport. Saudi Arabia launched a military operation overnight in Yemen by a regional coalition to defend the government of embattled President Abedrabbo Mansour Hadi as the country teeters on the brink of civil war. AFP PHOTO / MOHAMMED HUWAIS (Photo credit should read MOHAMMED HUWAIS/AFP/Getty Images)
Yemeni civilians and security forces stand at the site of a Saudi air strike against Huthi rebels near Sanaa Airport on March 26, 2015, which killed at least 13 people. Saudi warplanes bombed Huthi rebels in Yemen, launching a military intervention by a 10-nation coalition to prevent the fall of embattled President Abedrabbo Mansour Hadi. AFP PHOTO / MOHAMMED HUWAIS (Photo credit should read MOHAMMED HUWAIS/AFP/Getty Images)
SANAA, YEMEN - MARCH 22: A group of people hold banners as they march during a demonstration against Shiite Houthi movement that interfere to the country's government, at Gamal Abdul Nasser Street in Taizz, Yemen on March 22, 2015. (Photo by Waddah Abdulqade Abdulqawi/Anadolu Agency/Getty Images)
Yemenis drive in a car loaded with their belongings in the Yemeni capital as they move to a safer place on March 26, 2015 after Saudi air strikes against Huthi rebels near Sanaa Airport. Saudi Arabia launched a military operation overnight in Yemen by a regional coalition to defend the government of embattled President Abedrabbo Mansour Hadi as the country teeters on the brink of civil war. AFP PHOTO / MOHAMMED HUWAIS (Photo credit should read MOHAMMED HUWAIS/AFP/Getty Images)
Yemeni police cadets loyal to the Huthi militia which controls Sanaa march during a group funeral for the victims of last week's multiple suicide bombings that targeted Huthi mosques in the Yemeni capital, on March 25, 2015. The Islamic State (IS) jihadist group claimed responsibility for the March 20 attacks on two mosques in Sanaa that killed at least 142 people. AFP PHOTO / MOHAMMED HUWAIS (Photo credit should read MOHAMMED HUWAIS/AFP/Getty Images)
ADEN, YEMEN - MARCH 25: Members of Yemen's General People's Committee deploy at mechanized unit in Aden, Yemen on March 25, 2015. (Photo by Wael Shaif Thabet/Anadolu Agency/Getty Images)
Yemeni police cadets loyal to the Huthi militia which controls Sanaa march during a group funeral for the victims of last week's multiple suicide bombings that targeted Huthi mosques in the Yemeni capital, on March 25, 2015. The Islamic State (IS) jihadist group claimed responsibility for the March 20 attacks on two mosques in Sanaa that killed at least 142 people. AFP PHOTO / MOHAMMED HUWAIS (Photo credit should read MOHAMMED HUWAIS/AFP/Getty Images)
ADEN, YEMEN - MARCH 24: A group of Yemeni men who want to return to military stage a demonstration outside the Military Command in Aden, Yemen on March 24, 2015. (Photo by Wail Shaif Thabet/Anadolu Agency/Getty Images)
TAIZZ, YEMEN - MARCH 23: Police intervene to the demonstrators during a demonstration against Shiite Houthi movement that interfere to the country's government, in Taizz, Yemen on March 23, 2015. (Photo by Waddah Abdulqade Abdulqawi/Anadolu Agency/Getty Images)
SANAA, YEMEN - MARCH 22: A group of people hold banners as they march during a demonstration against Shiite Houthi movement that interfere to the country's government, at Gamal Abdul Nasser Street in Taizz, Yemen on March 22, 2015. (Photo by Waddah Abdulqade Abdulqawi/Anadolu Agency/Getty Images)
TAIZZ, YEMEN - MARCH 23: People hold flags and banners during a demonstration against Shiite Houthi movement that interfere to the country's government, in Taizz, Yemen on March 23, 2015. (Photo by Waddah Abdulqade Abdulqawi/Anadolu Agency/Getty Images)
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Prices soared as much as 6 percent the previous day after a Saudi-led coalition of Arab nations began strikes on Shi'ite Houthis and allied army units who have taken over much of Yemen and seek to oust President Abd-Rabbu Mansour Hadi.

"While Yemen is a small producer (145,000 barrels per day in 2014), the price rally is driven by fears of potential escalation and the proximity of the Bab el-Mandeb strait," Goldman said.

Closure of the strait could affect 3.8 million barrels a day of crude and product flows, but analysts said tankers could be diverted to travel around Africa instead of passing Yemen.

"At the moment, the fighting is located in the central part of the country around the capital of Sanaa. Even if fighting did progress south and potentially threaten tankers moving through the Bab el-Mandeb Strait, they could simply take the longer route around Africa," ANZ bank said on Friday.

Analysts also said that the less than 40 km narrow strait between Yemen and Djibouti was heavily militarized by the West, with the United States and France both operating bases in Djibouti and NATO and other allies having a fleet presence in the Gulf of Aden to combat piracy.

ANZ said that a bigger impact from the Middle East on oil prices might come from a potential nuclear deal with Iran, which could result in a loosening of western sanctions against Tehran and rising exports of its oil reserves.

"With potentially 30 million barrels stored offshore, it (Iran) could quickly flood an already saturated oil market," ANZ said.

Goldman and ANZ both noted that any nuclear deal with Iran was unlikely to lead to higher Iranian oil exports before the second half of the year.

"However Brent oil would likely lose its recent risk premium and fall back to the mid-50s," ANZ said.

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