NEW YORK | By Barani Krishnan
Oil tumbled 5 percent on Friday, erasing the previous session's gains, as Yemen's conflict looked less likely to disrupt Middle East crude shipments and investors turned their focus to talks for a potential Iran nuclear deal that could put more supply on the market.
Oil prices still notched their second straight weekly gain, boosted by the dollar's weakness in recent sessions. U.S. crude had its biggest weekly gain in more than a month.
U.S. crude and global benchmark Brent oil spent most of the session in a tight range, down about 2 percent. But they fell sharply in late trading.
Brent settled down $2.78 at $56.41 a barrel. U.S. crude settled $2.56 lower at $48.87. Both fell further after the market settled.
On Thursday, oil jumped 5 percent on fears that the conflict in Yemen could disrupt cargoes on the neighboring Bab el-Mandeb Strait, where 3.8 million bpd of crude and oil products flow.
Yemen's Houthi rebels made broad gains in the country's south and east despite a second day of Saudi-led air strikes meant to check the Iranian-backed militia's efforts to overthrow President Abd-Rabbu Mansour Hadi.
But the oil market paid scant attention to the conflict, and focused instead on Iran. Tehran and major powers pushed each other for concessions ahead of an end-of-March deadline for a preliminary nuclear deal that could lift sanctions on the OPEC nation's oil exports.
"The bulls caved after sensing an Iranian nuclear deal might happen by the weekend. Nobody wants to go home long oil on a Friday, with news like this," said Tariq Zahir, fund manager at Tyche Capital Advisors in Laurel Hollow in New York.
Tehran is keen to recover market share lost under the U.S.-led sanctions that have restricted its crude exports to just 1 million barrels per day from 2.5 million bpd in 2012.
"Both sides have a lot of skin in the game in terms of the pressure to deliver something, so we're probably going to hear noise that they have a deal or are close enough but will have to postpone to another deadline," said John Kilduff, partner at New York energy hedge fund Again Capital.