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Oil has climbed around 15 percent this month due
to concern over the conflict in Yemen, Saudi Arabia's southern
neighbor.
The seaways around Yemen are some of the most important for the
international oil trade with access points to the Red Sea and
Suez Canal as well as the Middle East Gulf.
The U.S. navy said on Monday it had sent an aircraft carrier and
a guided-missile cruiser into nearby waters.
Brent hit a 2015 high of almost $65 a barrel on April 16, up
more than 40 percent from a January low just above $45.
Prices have also been supported by speculation over falling U.S.
output after data showing the number of U.S. exploration and
production oil rigs fell to their lowest since 2010.
Brent crude for June <LCOc1> was down 30 cents at $63.15 a
barrel by 1105 GMT. U.S. crude for May <CLc1>, which was due to
expire later on Tuesday, was down 10 cents at $56.28 a barrel.
"Geopolitics is supporting oil at the moment," said Tamas Varga,
analyst at London brokerage PVM Oil Associates.
But the global oil market is heavily oversupplied and a rapid
build of inventories, particularly in the United States, has
been weighing on prices.
U.S. commercial crude oil inventories are forecast to have
increased by 2.4 million barrels last week, rising for the 15th
consecutive week, a preliminary Reuters survey showed. <EIA/S>
Saudi Oil Minister Ali al-Naimi told Reuters in Seoul this week
that the world's top crude exporter expected to produce at near
record highs of around 10 million barrels per day (bpd) in
April.
Analysts warn that OPEC's ability to cope with an unexpected
surge in demand is diminishing fast.
"If the demand and non-OPEC supply responses to lower prices are
similar to what was experienced in the 1980s, the very low level
of spare capacity carries a risk of a price spike in the not too
distant future," said analysts at PIRA Energy.
OPEC's spare capacity could halve to as low as 1.7 million bpd
this year, far below the level of more than 10 million bpd in
the 1980s, when Saudi Arabia last opted for market share over
price.
(Additional reporting by Jacob Gronholt-Pedersen in Singapore;
editing by Jason Neely)
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