LONDON (BLOOMBERG) - Oil prices fell after a report that Saudi Arabia has moved to impose a partial ceasefire in Yemen, bringing hope of easing tensions in the Middle East.

Saudi Arabia has agreed to a ceasefire in four areas in Yemen, including San'a, Dow Jones reported, citing unidentified people familiar with the plans. Crude had already been heading for a weekly decline as Opec's largest producer is about a week ahead of its repair schedule following attacks last week and is pumping more than 8 million barrels a day, according to people familiar with the matter.

While the return of production in Saudi Arabia has weighed on prices this week, the decline also reflects a deepening manufacturing slump in Germany, more signs of economic weakness in China and rising crude stockpiles in the US. The potential ceasefire in Yemen will likely help to cool growing political tensions in the region, after the attacks on Saudi oil infrastructure on Sept 14 knocked out 5 per cent of global production and resulted in the US planning to move more troops to the region.

If a ceasefire is agreed, "then we should return to US$60 (S$82) as we are back to focusing only on growth and demand worries", said Ole Hansen, head of commodities strategy at Saxo Bank.

The US, Saudi Arabia and major European powers have all blamed Iran for the attacks, though Teheran has denied the allegations. Houthi rebels, which the Saudis are battling in Yemen, have claimed responsibility for the assault.