Oil steeply drops in Asia, as markets closely watch Iran talks and Yemen escalation

On Thursday crude oil prices steeply dropped in Asia as investors eyed events on the Arabian peninsula in Yemen and sought clarity on a possible deal over Iran's nuclear program and economic sanctions imposed on it.

On the New York Mercantile Exchange, WTI crude for May delivery slumped 1.26% to $49.46 a barrel.

Crude oil prices surged more than 5% overnight, as negotiations concerning Iran's nuclear program dragged into the last-minute on Wednesday evening in Switzerland.

While it was signalled that progress had been achieved on most aspects of the complex agreement, there were still key issues that needed to be resolved on Wednesday during high-level talks in Lausanne. A central topic of the discussion was whether rigid economic sanctions against Iran will be lifted in the next three months before an official agreement could be ratified.

Loosening of sanctions could trigger more oil pouring from Iran into an already saturated global oil market.

Crude exports from Iran have been restricted to roughly one million barrels per day after the economic sanctions were imposed on Iran three years ago.

Iran reportedly has 30 million barrels of oil stored in offshore tankers ready for export, according to Reuters. The added supply in the Persian Gulf could be the next driver of lower oil prices.

On the Intercontinental Exchange (ICE), Brent crude for May delivery surged 2.38 or 4.33% to $57.50 a barrel in U.S. afternoon trading, before sliding back to $57.00 on Wednesday.

As negotiations in Lausanne reportedly moved into "double overtime," foreign ministers from France, China and Russia left the meetings in frustration.

And as Iran foreign minister Mohammad Javad-Zarif told the Islamic Republic News Agency (IRNA) that progress led to solutions on most issues, United Kingdom counterpart Philip Hammond told the BBC that "key issues still needed to be tackled." Nevertheless, the sides had reached a "broad framework of understanding," Hammond added.

The negotiating parties missed the third deadline imposed by both sides over the last year - which was Tuesday. Back in the United States leaders from both major parties pressed the State Department to leave the negotiations if a favorable deal could not be reached.

The international comunity was also concerned about the escalation of fighting in Yemen between Saudi Arabian-led troops and Shiite-backed Houthi rebels.

Despite a week of Saudi airstrikes, tanks containing Houthi fighters reportedly reached the southern city of Aden, the main foothold of Yemen president Abd Rabbu-Mansour.

Earlier on Wednesday, at least 35 people reportedly were killed during a blast at a Yemen dairy plant that reportedly had been occupied by the rebels. Oil traders are sensitive to risky geopolitical news involving Saudi Arabia, the world's largest oil exporter.