Oil prices head for big weekly loss as supply fears wane

[September 27, 2019]  By Shadia Nasralla

LONDON (Reuters) - Oil prices fell on Friday and were heading for a weekly loss on a faster than expected recovery in Saudi output while slowing Chinese economic growth dampens the demand outlook.

Brent crude <LCOc1> fell 93 cents to $61.81 a barrel by 1102 GMT while U.S. crude <CLc1> sliped by 65 cents to $55.76. Both were down almost 4% over the week, representing WTI's biggest weekly loss in 10 weeks and Brent's biggest in seven.

Brent and WTI were also hit by a Wall Street Journal report citing unnamed sources saying that Saudi Arabia had agreed a partial ceasefire in Yemen, said analysts in the Reuters Global Oil Forum.

Brent is just above its level before attacks on Saudi facilities on Sept 14, which initially halved the kingdom's production.

Sources told Reuters this week that Saudi Arabia had restored capacity to 11.3 million barrels per day. Saudi Aramco has yet to confirm it is fully back online.

"The risk premium is deflating further," said Saxo Bank's Ole Hansen.

The International Energy Agency (IEA) said on Friday that it might cut its estimates for global oil demand for 2019 and 2020 should the global economy weaken further.

Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/File Photo

"If the global economy weakens, for which there are already some signs, we may lower oil demand expectations," IEA Executive Director Fatih Birol told Reuters.

In China, the world's second-largest economy and biggest importer of crude oil, industrial companies reported a contraction in profits in August.

A surprise 2.4 million-barrel build in U.S. crude inventories last week also weighed on prices.

Key oil freight rates from the Middle East to Asia rocketed as much as 28% on Friday in the global oil shipping market, spooked by U.S. sanctions on units of China's COSCO for alleged involvement in ferrying crude out of Iran.

The COSCO vessels are equal to about 7.5% of the world's fleet of supertankers, Refinitiv data showed.

Emerging details connected to the impeachment inquiry into U.S. President Donald Trump also helped to dent demand sentiment, analysts said.

(Additional reporting by Roslan Khasawneh in SINGAPORE; Editing by Edmund Blair and David Goodman)

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