Oil prices fell on Tuesday after Saudi Arabia announced the end of its military campaign in Yemen, easing tensions in the Middle East, and traders expected another weekly build in US crude stockpiles. The Saudi-led coalition bombing Yemen said its three-week operation against Iran-allied Houthi rebels was over, and it would focus now on security, counterterrorism, aid and a political solution for Yemen. An updated Reuters survey, meanwhile, showed that US crude inventories likely rose by 2.9 million barrels last week, up for a 15th straight week.
The American Petroleum Institute, an industry group, will issue its own reading on the inventory situation at 4:30 p.m. EDT (2030 GMT), before official stockpile data due from the government on Wednesday. US crude's front-month May contract, which expired at the close of Tuesday's session, finished down $1.12, or 2 percent, at $55.26 a barrel. The nearby June contract, which will become the front-month beginning on Wednesday, settled down $1.27 at $56.61.
UK North Sea Brent crude, the more widely used global benchmark for oil, fell $1.37, or 2.1 percent, to $62.08. "The market's gone up quite a bit lately and was due for a correction, so the Saudi announcement was a step in the right direction in the sense that it diffuses some of the tensions in the Middle East," said Joseph Posillico, senior vice president of energy futures at Jefferies in New York.
Despite Tuesday's declines, Brent remained up nearly 13 percent for April while US crude was about 16 percent higher after gains over the past two weeks on speculation that the selloff in oil that began last summer was losing steam. Some analysts disagree that the market is on the cusp of a longer-term recovery.
Commerzbank's Carsten Fritsch sees Brent heading down to the low $50s a barrel last seen in March. The head of the world's largest oil trading company, Vitol, said oil prices were likely to slip as refineries undergo maintenance work in the second quarter. "We will probably see another dip in oil prices in Q2", but not below January lows, Ian Taylor told Reuters on the sidelines of an industry conference in Lausanne, Switzerland.
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