Oil Report

CORRECTED - Yemen rebels claim control of northern district

* Shi’ite rebels say they control district bordering Saudi

* UNHCR cancels cross-border aid convoy

(Removes reference to Mubarak in last paragraph)

SANAA, Oct 8 (Reuters) - Zaydi Shi’ite rebels in north Yemen said they had taken control of a district bordering Saudi Arabia, while a U.N. aid group cancelled a cross-border humanitarian convoy.

“Citizens took full control of government buildings” in the administrative district of Munabbih, a rebel statement late on Wednesday said. It said local residents had turned against the authorities because of rights abuses.

A government security source issued a statement saying the army had killed 62 rebels, referred to as Houthis after their leaders’ clan, in mountainous Saada province where most of the Zaydi Shi’ites, a third of Yemen’s 23 million population, live.

There was no official comment on the situation in Munabbih, which borders Saudi Arabia inside Saada province.

The United States and Saudi Arabia, the world’s leading oil exporter, fear that fighting in the north of Yemen, and frequent street clashes with separatists in the south, could create instability that al Qaeda could exploit to carry out attacks in Saudi Arabia. It has already staged a comeback in Yemen in the past two years, with attacks on government and foreign targets.

The northern Zaydi rebels say they suffer religious discrimination by Sunni fundamentalists who have gained in strength because of President Ali Abdullah Saleh’s close ties to Saudi Arabia, which adheres to a puritanical form of Sunni Islam.

The United Nations High Commissioner for Refugees (UNHCR) delayed an aid convoy that was due to set off from Saudi Arabia into Yemen this week. It was not clear if the delay was due to the rebels seizing the Munabbih area.

A UNHCR official in Riyadh said the convoy, which was to bring aid to 2,000 people stranded near the border, was still waiting for security clearance from the Saudi and Yemeni sides. Around 150,000 civilians have been displaced since fighting first broke out in 2004, and international aid group Oxfam warned last month of an impending humanitarian crisis.

Veteran president Saleh has sought to drum up Arab support for the government, which launched what it termed “Operation Scorched Earth” in an attempt to crush the Houthis in August.

Arab League chief Amr Moussa said on Tuesday Arab states supported the unity of Yemen. Tens of thousands of southerners, who want to secede because of what they call political and economic marginalisation, protested that day calling for Arab states to protect the south, an independent state until 1990.

Palestinian President Mahmoud Abbas, Egypt’s Foreign Minister Ahmed Aboul Gheit and Egyptian intelligence chief Omar Suleiman met Saleh in Sanaa a few days before.

Reporting by Mohamed Ghobari and Ulf Laessing; Writing by Andrew Hammond; Editing by Mark Trevelyan