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Oil Prices Ease as Supply Threat Eases

Oil prices fell more than $1 on Friday, after sharp gains in the previous session, as worries of a disruption to crude supplies due to Saudi Arabia-led air strikes in Yemen eased.  Goldman Sachs said in 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.

Brent crude LCOc1 was at $58.18 a barrel at 0421 GMT, down $1. It fell to $58.17 earlier in the session. U.S. crude CLc1 was down $1.06 at $50.37 a barrel, after dropping to a low of $50.25 earlier in the day.  Oil jumped around 5 percent on Thursday, the biggest daily gain in a month, as air strikes in Yemen by Saudi Arabia and its Gulf Arab allies sparked fears that escalation of the Middle East battle could disrupt world crude supplies.

The rally had been driven by worries over the possible impact on the Bab el-Mandeb strait, the closure of which could affect 3.8 million barrels a day of crude and product flows.  Yemen is a small producer, with an output of around 145,000 barrels per day in 2014.  “Now the market is questioning how sustainable the (impact of the) geopolitical event is on oil prices,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

Reuters [1]

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