Oil prices fell sharply today after Saudi Arabia agreed to a partial ceasefire in Yemen, the Wall Street Journal reported, citing unnamed sources familiar with the move.

The Houthi rebels that Saudi Arabia and the UAE are fighting in Yemen said at the end of last week that drone attacks on Saudi targets would stop if the Kingdom stopped targeting its positions with air strikes.

The Houthi proposal came a day after Riyadh launched an attack on Houthi-held Hodeida—Yemen’s key port, which has been under rebel control for a while despite numerous attempts by the Saudi-led coalition to wrest control of the critical Bab el-Mandeb port.

The Houthi proposal came as a surprise to some, although it is not the first ceasefire in the years-long conflict. In December 2018, Yemen’s warring parties agreed to a UN-brokered ceasefire in and around the key port of Hodeidah, to facilitate the humanitarian access and the flow of goods to the civilian population who are suffering from the world’s worst humanitarian crisis.

Three weeks after the UN-brokered ceasefire in Hodeidah entered into force, the warring sides continued to trade accusations in January over who had broken the fragile truce. Since then, fighting has been more or less constant.

The Houthi rebels took responsibility for the September 14 attacks on Saudi oil infrastructure that cost some 5.7 million bpd in lost production capacity. Even so, both Riyadh and Washington blame the attacks on Iran, which has denied any involvement. The UK, France, and Germany followed suit, accusing Iran of the attacks.

Meanwhile, oil prices were already pressured by the announcement earlier this week that Saudi Arabia had returned to the level of production from before the attacks. That was despite reports suggesting it could take months for production to return to normal.

At the time of writing, Brent crude was trading at $60.98 a barrel, with West Texas Intermediate at $55.81 a barrel, both down by more of a percentage point.

By Irina Slav for Oilprice.com

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