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 Goldman Sachs said the bombing of 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.
North Sea Brent crude <LCOc1> was down 90 cents at $58.29 a barrel
by 0640 EDT after hitting an intraday low of $57.76. U.S. crude
<CLc1> was down $1.00 at $50.43 a barrel.
Oil jumped around 5 percent on Thursday, its biggest daily gain in a
month, after 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 Saudi-led coalition launched more air strikes on Friday against
targets in the Yemeni capital of Sanaa, controlled by Shi'a Houthi
fighters allied to Iran.
Worries over the possible impact of the geopolitical tensions on the
Bab el-Mandeb Strait, the closure of which could affect 3.8 million
barrels per day (bpd) of crude and product flows, put oil prices on
track for weekly gains.
Brent was headed for almost a 5 percent weekly rise - the biggest
gain since early February. U.S crude was set for a 10 percent jump -
the most since the start of 2011.
But Yemen is a small oil producer, with an output of around 145,000
bpd in 2014.
A bigger impact on oil prices could come from a nuclear deal with
Iran, which could result in a loosening of Western sanctions against
Tehran and rising exports of its oil reserves.
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Iran is reported to have 30 million barrels stored offshore ready
for sale, barrels that could quickly flood an already saturated oil
market, analysts say.
Although Goldman Sachs says any deal with Iran would be unlikely to
lead to higher Iranian oil exports before the second half of the
year, the prospect of higher Iranian supply weighed on market
sentiment.
"The risk for the weekend and early next week is the possibility of
a political agreement (with) Iran," said Swiss analyst Olivier
Jakob. "We want to be positioned for the possibility of the Strait
of Hormuz opening up rather than for the possibility of the Bab
el-Mandeb shutting down."
(Additional reporting by Henning Gloystein and Keith Wallis in
Singapore; Editing by Dale Hudson)
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