Brent trades near four months high on possible US output decline and Yemen escalation

On Monday Brent crude prices held near a 4 and a half month high, above $65 a barrel, backed by fears over fighting in Yemen disrupting Middle East supplies and signs that U.S. shale output may have started to decline.

Brent had edged down 5 cents to $65.23 a barrel by 0623 GMT, after posting its third weekly gain last week and touching a Dec. 10 high of $65.80.

U.S. crude fell 14 cents to $57.01 a barrel, after rising for the sixth consecutive week in its longest stretch of gains since the first quarter of 2014.

The amount of active U.S. rigs drilling for oil has dropped for a record 20 weeks in a row to the lowest since 2010, according to Baker Hughes data, fuelling expectations of a drop in U.S. production.

The latest rig count underscores a slight decline in U.S. oil production between the second and third quarter, resulting in a 200,000 barrels per day (bpd) growth year-on-year in the fourth quarter, Goldman Sachs analysts said in an April 24 note.

However, the output in 2016 is expected to grow at a faster pace of 280,000 bpd due to increased productivity and a backlog of uncompleted wells, the bank said.

Saudi Arabia continued its air strikes against Houthi militia forces in Aden, but there were no fresh moves towards dialogue.

A senior oil analyst at BMI Research, said supply from the world's top exporter Saudi Arabia remained steady and there was no immediate threat to major oil shipping routes in the region, despite the Yemeni escalation.

Libya's oil output is set to fall again as a strike by Libyan security guards over salary payments has forced the closure of the western El Feel oilfield, a spokesman for state oil firm NOC said on Sunday.