Investing.com -- While crude futures fell by more than $2 a barrel on Friday as supply concerns related to the crisis in Yemen diminished, oil prices still ended the week with one of its highest weekly gains in more than four years.
Although Saudi Arabian-led airstrikes against Shiite-backed Houthi rebels in Yemen continued on Friday, questions arose on the impact of the attacks on the nation's oil supply. Yemen is strategically located on the Bab el-Mandeb, a strait that connects the Gulf of Aden with the Red Sea. Earlier this week, crude prices shot up amid heightened fears that the closure of the strait could limit oil exports out of the critical chokepoint.
Goldman Sachs (NYSE:GS), however, may have assuaged such fears with a contingency plan for oil tankers in the event that the strait is closed. In a note to investors, analysts from the bank raised the possibility that the tankers could be diverted to travel around Africa if the strategic pathway is unavailable. In addition, U.S. Army General Lloyd Austin told a Senate hearing that the military will work with its Gulf and European partners to ensure that the strait remains open in spite of the conflict.
As a result, WTI crude for May delivery on the New York Mercantile Exchange fell $2.69 or 5.22% to $48.75 a barrel. On Thursday, WTI crude surged more than 5%, its largest daily increase for the month of March, after Saudi Arabia and Egypt announced plans for launching a ground attack against the Houthi militants. For the week, WTI crude increased by approximately 6% or $2.20 a barrel, one of its top weekly increases since 2011.
Meanwhile, British Foreign Secretary Philip Hammond indicated that the two sides negotiating an Iranian Nuclear pact were more than "halfway to a deal." An accord with Western powers could loosen sanctions against Iran, freeing up millions of barrels that are currently stored in reserves. Iran reportedly has 30 million barrels of stored oil ready for export once the sanctions are lifted. The added amounts could depress an oil market already inundated with a large supply glut.
Goldman Sachs downplayed the effects of both geopolitical events on crude prices.
"We expect both events to have negligible near-term supply impacts, with the build in crude inventories set to continue in the second quarter of 2015. Longer term, a deal with Iran could lead to greater Opec supplies although the timing of the sanction relief remains uncertain," the firm said in the investor note.
On the Intercontinental Exchange (ICE), brent crude for May delivery fell $2.83 or 4.78% to $56.36 a barrel. Brent futures rose by nearly 45 cents for the week.
The spread between the international and U.S. domestic benchmarks for crude stood at 7.61 a barrel, down from 8.55 at the start of the week.
Oil services firm Baker Hughes (NYSE:BHI) said in its weekly rig count that the number of oil rigs nationwide last week fell by 12 to 813. A week earlier, the number of oil rigs in the U.S. decreased by 56. The reduction of 12 rigs marks the lowest weekly decline in nearly four months.