Oil prices fall as supply risk premium fades, demand outlook drags

By Roslan Khasawneh
SINGAPORE, Sept 27 (Reuters) - Oil prices fell on Friday,
erasing more of the gains realised after the Sept. 14 attacks on
Saudi Arabian oil facilities, as the rapid return of production
capacity from the world's top exporter squashed risk premiums.
Prices were also pressured by worries of weak global
economic growth and its effect on oil demand.
Brent crude LCOc1 futures fell 32 cents, or 0.5%, from the
previous session's close to $62.42 a barrel by 0131 GMT.
U.S. West Texas Intermediate (WTI) crude futures CLc1 fell
8 cents, or 0.1%, to $56.33 a barrel.
"For most of the week ... the market has been trading lower
as oil bulls have been discouraged by the quicker-than-expected
return of Saudi oil output," said Stephen Innes, Asia Pacific
market strategist at AxiTrader.
WTI futures were down 3% so far for the week, marking the
largest weekly loss in 10 weeks, while Brent was down 2.9% on
the week, its largest weekly loss in seven.
Saudi Arabia had brought its production capacity back to
11.3 million barrels per day (bpd) less than two weeks after the
attacks on it oil facilities, sources briefed on the matter told
Reuters this week.
The attacks, which knocked out 5.7 million bpd of
production, initially sent oil prices up 20% although they
dropped soon after as the kingdom pledged to bring back output
by the end of September.
A surprise 2.4 million-barrel build in U.S. crude
inventories last week also weighed on prices. EIA/S
U.S. inventories may rise further over the near term,
further pressuring prices, as American refiners curb runs for
maintenance, analysts said.
"The expected lower demand for oil inputs into (U.S.)
refineries typically sees U.S. crude inventories swell, all of
which could pose a significant downside risk for prompt oil
prices," Innes said.