Southern Yemeni separatists withdrew on Saturday from some government buildings in Aden that they seized last week but held on to military camps that give them control over the southern port, interim seat of Yemen's Saudi-backed government.
The separatists' takeover of Aden has strained a Saudi-led military coalition formed to confront the Iran-aligned Houthis as the movement stepped up attacks on the kingdom, hitting a Saudi oil installation on Saturday.
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A Houthi military spokesman said the group launched 10 drones on oil installations at Shaybah in eastern Saudi Arabia, describing it as the "biggest attack in the depths" of the kingdom and vowing further operations.
State oil company Aramco said the attack caused a "limited fire" at a gas plant which had been contained and did not impact production. Energy Minister Khalid al-Falih condemned the strike as "cowardly" sabotage directed at global oil supplies.
The Yemen conflict is widely seen in the region as a proxy war between Saudi Arabia and regional rival Shi'ite Muslim Iran.
The Western-backed, Sunni Muslim coalition intervened in Yemen in March 2015 to try to restore the internationally recognized government of Abd-Rabbu Mansour Hadi after the Houthis ousted him from power in the capital Sanna in late 2014.
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The tensions have complicated United Nations efforts to implement a stalled peace deal in the main port city of Hodeidah, on Yemen's west coast, and pave the way for political talks to end the war that has pushed the country to the brink of famine.
Coalition warplanes fired flares over Aden at dawn on Saturday near camps occupied by separatist fighters after the alliance renewed a call for them to withdraw from all sites they captured last weekend.
The separatists, backed by coalition member the United Arab Emirates, are a main component in the anti-Houthi alliance. But the war has rekindled old strains between north and south Yemen - formerly separate countries until 1990.
The coalition statement urged all forces in the south to unite in the fight against the Houthis.
Partial Aden withdrawal
Southern Transitional Council (STC) sources told Reuters their forces, which had already moved away from the nearly empty presidential palace and central bank, were vacating government institutions under the supervision of a Saudi-UAE delegation.
However, they said the forces would not quit the government military camps that give them effective control of the city.
"We will not retreat, we will not budge and planes will not scare us," a statement from one of the brigades fighting as part of separatist forces said, in response to low-flying war planes.
The Saudi-backed government's information minister, Muammar al-Iryani, welcomed the STC withdrawal from state institutions which he said included the central bank, Aden hospital and the cabinet secretariat.
"Measures are being completed to hand over the interior ministry and Aden refinery to presidential guard units under the supervision of the coalition," he tweeted.
An STC spokesman has said they would not cede control unless the Islah party - a backbone of Hadi's government that is seen by the UAE as an offshoot of the Muslim Brotherhood - and northerners were removed from positions of power in the south.
Abu Dhabi echoed a Saudi call for dialogue, but has not directly asked southern forces that it funds and arms to cede control. Saudi Arabia wants to host a summit to end the crisis. Hadi's government says it will not attend before separatists reverse what it calls their coup.
The Yemen war has been in military stalemate for years with the Houthis holding on to Sanaa and most major urban centers. The group says it is fighting a corrupt system.
Saudi Arabia and the UAE have come under pressure from Western allies, including those that supply them with arms, to end a conflict that has killed tens of thousands.
The UAE in June scaled down its presence in Yemen but continues to maintain influence through thousands of Yemeni forces it has built and trained, including southern separatists.