Oil prices drop on possible Iran deal, dollar

Oil prices drop on possible Iran deal, dollar Mon, Mar 30 06:13 AM EDT image By Christopher Johnson LONDON (Reuters) - Oil prices fell on Monday as officials from Iran and six world powers discussed a possible deal over Tehran's nuclear programme that could bring an end to sanctions and allow an increase in Iranian oil exports. The two sides have until the end of Tuesday to come up with an agreement at talks in Lausanne, Switzerland. Officials close to the talks have said progress has been made and many investors believe a deal is in the making. Few expect the talks to end without some sort of agreement. "Regarding Iran, there are two possible outcomes: a framework deal or an extended deadline," Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo, told the Reuters Global Oil Forum. Brent crude was down 40 cents at $56.01 a barrel by 0938 GMT as the market began to price in a deal with Iran. U.S. crude was down 80 cents at $48.07. Oil markets are well supplied and recent figures show global production outstripping demand by around 1.5 million barrels per day (bpd), filling oil inventories. "Further downward pressure may come at any time from a nuclear agreement with Iran," said Michael Wittner, analyst at Societe Generale. "If a framework agreement is reached, we would expect an immediate bearish knee-jerk reaction in the markets, with oil prices quickly losing on the order of $5." Barclays said a build in U.S. stocks would make its way into an oversupplied global market in the second quarter and that demand would unlikely be strong enough to support oil prices once that happened. "Continued dollar strength is (also) a headwind to the oil price recovery," Barclays said, forecasting the dollar would rise above parity with the euro by the fourth quarter of 2015. Few investors expect the Organization of the Petroleum Exporting Countries, which pumps around a third of the world's oil, to restrain production to help push up prices. Oil producers are much more focused on maintaining market share, analysts say. Lower oil prices have encouraged some oil and gas companies to stop drilling, particularly in the United States, but this is unlikely to affect oil production until later this year. "The current rig count is pointing to U.S. production declining slightly sequentially in 2Q15 and 3Q15," Goldman Sachs said, adding that activity could bounce back in 2016 as drillers benefit from falling production costs. (Additional reporting by Henning Gloystein in Singapore; Editing by Jason Neely and Dale Hudson) ----------------------------- Air strike kills at least 40 at Yemen camp for displaced Mon, Mar 30 17:41 PM EDT image 1 of 11 By Mohammad Mukhashaf and Sami Aboudi ADEN (Reuters) - An air strike killed at least 40 people at a camp for displaced people in north Yemen on Monday, humanitarian workers said, in an attack which apparently targeted nearby Houthi fighters who are battling President Abd-Rabbu Mansour Hadi. Yemen's state news agency Saba, which is under the control of the Houthis, said the camp at Haradh was hit by Saudi planes. It said the dead included women and children, and showed the bodies of five children laid out on a blood-streaked floor. A Saudi military spokesman said the kingdom was seeking clarification on the incident. "It could have been that the fighter jets replied to fire, and we cannot confirm that it was a refugee camp," Brigadier General Ahmed Asseri said. "We will ask the Yemeni official agencies to confirm that," he told reporters. Hadi's Foreign Minister Riyadh Yassin earlier blamed Houthi artillery for the explosion. The International Organisation for Migration, which initially reported 45 deaths, said 40 people were killed and 200 wounded - dozens of them severely. A humanitarian worker said earlier that the strike hit a truck of Houthi militiamen at the gate to the Mazraq camp, near Haradh, killing residents, guards and fighters. The medical aid organization Medecins Sans Frontieres said at least 34 wounded people were brought to a hospital in Haradh which it supports. Another 29 were dead on arrival. "People in Al Mazraq camp have been living in very harsh conditions ... and now they have suffered the consequences of an air strike on the camp," said Pablo Marco, MSF operational manager for Yemen. Mazraq, in the province of Hajja next to the Saudi border, is a cluster of camps that are home to thousands of Yemenis displaced by over a decade of wars between the Houthis and the Yemeni state, as well as East African migrants. Saudi Arabia, supported by regional Sunni Muslim allies, launched an air campaign to support Hadi after he withdrew last month from the capital to Aden. He left Yemen on Thursday to attend an Arab summit and has not returned. The fighting has brought civil war to the Arabian Peninsula's poorest country. Sunni Muslim tribesmen allied with Hadi are battling northern Zaydi Shi'ites backed by soldiers loyal to former President Ali Abdullah Saleh, who stepped down after 2011 mass protests against his 33 years in office. Yemen was already sliding into chaos with a growing southern secessionist movement and a covert U.S. drone campaign -- now stalled -- against al Qaeda in the east. The growing power of the Houthis, part of a Shi'ite minority that makes up about 20 percent of the country's 25 million people, also means Yemen has become the latest stage for Saudi Arabia's power struggle with Iran. The two regional rivals support opposing sides in Syria's civil war and in neighboring Lebanon. Tehran also supports and arms Shi'ite militias in Iraq, although it denies Riyadh's accusations that it supports Yemen's Houthis militarily. WARSHIPS FIRE ON HOUTHIS In the capital Sanaa, controlled by the Houthis, jets struck around the presidential palace overnight and made more raids throughout the day. Most of the air strikes, launched on Thursday, have taken place so far only at night. In the south, Houthi fighters closed in on the port city of Aden, the last major stronghold of Hadi supporters, and residents said warships believed to be Egyptian shelled a column of Houthis advancing along the coastal road. It was the first known report of naval forces taking part in the conflict. A Reuters reporter heard heavy explosions and saw a thick column of black smoke rising from the area about 15 km northeast of Aden, apparently after air strikes. Saudi-led war planes also shook buildings in Aden's Khor Maksar district when they fired at least one missile at the airport, where Houthi-allied fighters are based, residents said. A stray shell killed at least three people on a mini-bus in the same area, local fighters said. A Hadi aide told the Dubai-based al-Arabiya TV that Houthi fighters also shelled the president's private residence in Khor Maksar killing a number of guards. While Hadi's fighters ceded ground around Aden, Pakistan announced it would send troops to support the Saudi-led coalition. "We have already pledged full support to Saudi Arabia in its operation against rebels and will join the coalition," a Pakistani official said. In a cabinet statement, Saudi King Salman said Riyadh was open to a meeting of all Yemeni factions willing to preserve Yemen's security, under the auspices of the six-member Gulf Cooperation Council. The Arab leaders agreed at their meeting in Egypt to form a unified military force to counter growing regional security threats such as the Yemen conflict. But working out the logistics of the force will be a protracted process and Yemen's rugged geography, internal power struggles and recent history all present challenges to any military campaign. Just four years after the 1990 unification of North and South Yemen, civil war erupted when southerners tried to break away, but were defeated by Saleh's northern forces. In the 1960s, intervention by Saudi Arabia and Egypt on opposing sides of a civil war in North Yemen led to a long and damaging military stalemate. Saudi Arabia says it is focusing for now on air strikes against the Houthis, rather than a ground campaign, promising to increase pressure on them over coming days. On Sunday, sources said Yemeni exports of liquefied natural gas (LNG) were running as normal despite the shutdown of major seaports. But French oil firm Total said on Monday operations at its Block 10 had been reduced, with gas production maintained only for local power generation and to supply nearby areas. Several countries have evacuated citizens from Yemen in recent days. About 500 Pakistani nationals were flown out of the Red Sea port of Hodeida on Sunday, and India said on Monday it was preparing to fly out 500 people from Sanaa. (Additional reporting by William Maclean, Noah Browning and Rania El Gamal in Dubai, Angus McDowall in Riyadh, Stephanie Nebehay in Lausanne; Writing by Dominic Evans; Editing by Angus MacSwan and Catherine Evans) ----------------------------------