The Jim Bakker Show

Wall Street to open lower after North Korea test, Fed comments

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks were poised for a lower open on Friday amid investor caution following a nuclear test by North Korea and comments by a U.S. Federal Reserve official that supported an interest rate hike.

North Korea conducted its fifth and biggest nuclear test on Friday and said it had mastered the ability to mount a warhead on a ballistic missile, drawing condemnation from the United States as well as China, Pyongyang’s main ally.

“The timing of North Korea flexing their nuclear muscles is interesting in that it comes on the heels of the leader of the free world’s trip to Asia,” said Art Hogan, chief market strategist at Wunderlich Securities in New York, referring to President Barack Obama, who arrived in Asia last week to attend a G20 meeting before touring other Asian nations.

“So that is in and of itself kind of insulting but it’s also disturbing if they are making significant traction here, but it’s hard to know.”

Futures extended losses after Boston Fed President Eric Rosengren, a historically dovish policymaker, said the Federal Reserve increasingly faces risks if it waits too much longer so a gradual policy tightening is likely appropriate.

S&P 500 e-minis <ESc1> were down 11.75 points, or 0.54 percent, with 148,435 contracts changing hands. Nasdaq 100 e-minis <NQc1> were down 28.25 points, or 0.59 percent, in volume of 15,946 contracts and Dow e-minis <1YMc1> were down 101 points, or 0.55 percent, with 16,420 contracts changing hands.

At 9:30 EDT (1330 GMT), Federal Reserve Bank of Dallas President Robert Kaplan, a non-voting member, is scheduled to speak.

The Fed will hold a two-day policy meeting on Sept. 20-21. Expectations for a rate hike had climbed in recent weeks after comments from a number of Fed officials, only to be tamped down again in the past several days after a host of disappointing economic reports. The current expectations for a September rate hike stand at 18 percent, according to CME’s FedWatch tool.

U.S. stocks have been subdued for two months, with the benchmark S&P 500 index failing to register a move of more than 1 percent on a closing basis in either direction since July 8. The index is still only 0.4 percent away from its last record high registered on Aug. 15.

Data due on Friday includes July wholesale inventories at 10 a.m. EDT (1400 GMT), which are not expected to have changed from the prior month.

Also due is the weekly rig count from Baker Hughes, which could impact the price of oil after both Brent <LCOc1> and U.S. <CLc1> prices surged more than 4 percent Thursday in the wake of a surprisingly huge drawdown in U.S. crude stocks.

Restoration Hardware <RH.N> shares surged 10.3 percent to $38.94 in premarket trading after the company posted second-quarter earnings that topped Wall Street expectations.

Pipeline company Enterprise Products Partners <EPD.N> late Thursday withdrew its takeover bid for rival Williams Cos Inc <WMB.N>, saying Williams’ lack of engagement left it with “no actionable path forward.”

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

Oil rally under pressure; record Saudi output offsets U.S. drawdown

By Barani Krishnan

NEW YORK (Reuters) – Oil’s near week-long rally was under pressure on Wednesday after an unexpected drawdown in U.S. crude and gasoline stocks was offset by worries that Saudi Arabia was cranking output to record highs even as OPEC talked of ways to ease a global glut.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down 5 cents at $46.53 a barrel by 1:03 p.m. EDT (1703 GMT), after trading as much as 21 cents higher.

Brent crude futures <LCOc1> rose by 42 cents to $49.65 a barrel. It reached five-week highs of $49.75 earlier.

WTI’s discount to Brent <WTCLc1-LCOc1> widened to a six-month high, raising the export potential for U.S. crude.

Oil rallied about 11 percent over the past four sessions since Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation the group was ready to reach an output freeze agreement with non-OPEC producers.

The markets briefly extended gains after the U.S. Energy Information Administration (EIA) said domestic crude inventories fell 2.5 million barrels last week, surprising analysts who had expected a build of 522,000 barrels. [EIA/S]

Gasoline stockpiles also fell 2.7 million barrels, more than expectations for a 1.6 million-barrel drop, the EIA data showed.

But the market’s upside was capped by a Reuters report that said Saudi Arabia could boost crude output in August to new records at 10.8-10.9 million bpd, overtaking Russia’s production, even as OPEC aims for a pact to curb global output.

The Saudis told OPEC they pumped 10.67 million bpd in July, versus their previous record of 10.56 million in June 2015. [OPEC/M]

Saudi-based industry sources said earlier in the year they expected the kingdom’s output to edge near record highs to meet summer demand for power. But they said it was unlikely that Saudi output will flood the market.

“One certain thing to be aware of is the Reuters report that Saudis may increase production to new record highs pushing near 11 million barrels per day,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.

“With the U.S. rig count coming back online for several weeks, even if a freeze did happen we would be talking about freezing at higher levels of output,” Zahir said.

Before last week’s drawdown, U.S. crude stockpiles had risen unexpectedly in three previous weeks. The U.S. oil drilling rig count has also risen without pause for seven weeks, signaling more production ahead. [RIG/U]

Reports of refinery outages in the United States, including a crude unit at Exxon Mobil Corp’s <XOM.N> 502,500 barrel per day (bpd) plant at Baton Rouge in Louisiana, added to the market’s downside. [REF/OUT]

Traders will be on the lookout for a U.S. Federal Reserve statement due at 2:00 p.m. (1800 GMT) to gauge if interest rates are to rise soon.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; editing by Jason Neely and Marguerita Choy)

Global stocks outlook dims with risk aversion on the rise again: Reuters poll

By Ross Finley and Rahul Karunakar

LONDON/BENGALURU (Reuters) – Optimism about stock market performance this year has wilted, with investors fretting about the global economy and unexpected shocks likely to condemn most key indices to a weaker performance than thought just a few months ago.

The latest Reuters poll of over 250 analysts, fund managers and brokers worldwide taken June 27-July 11 also showed an intensifying pull between stretched share prices – with Wall Street at a record high – and bond markets, with most government bond yields at record lows and vast swathes of them negative.

Strategists at Citi have noted that the gap between the global government bond benchmark yield, just 0.5 percent, and the dividend yield on global equities of about 2.7 percent, is the widest in 60 years, and on that basis, stocks look attractive.

Ten of the indexes polled are expected to be lower by the end of the year when just three months ago the consensus view among forecasters was that they would be up, in some cases significantly. [Graphic: http://tmsnrt.rs/29t4c95]

But the poll results do not provide a definitive picture on where forecasters are recommending investors put their money, although hopes remain high once again that next year will be better, particularly for struggling emerging markets.

The Bank of England is set to reverse course in response to Britain’s shock vote on June 23 to leave the European Union, with rate cuts and renewed government bond purchases nearly certain in an attempt to limit the damage. [BOE/INT]

The trouble is, even though the vast majority polled don’t expect any financial crisis from Brexit, that shock has increased risk aversion, as well as the risk a likely British recession may have ripple effects well beyond its borders.

Expectations for an interest rate rise in the United States have also faded despite a surprisingly strong jobs report last week, triggering a rally in stocks and U.S. Treasuries.

So while in past years the prospect of more central bank cash might have lit a fire under the stock market, there is a clear sense now of pessimism in the latest results about the outlook for European shares, as well as Britain’s FTSE 100. [EPOLL/FRDE] [EPOLL/GB]

“The Brexit vote has damaged the outlook for the global economy and EPS (earnings per share). This is clearly unhelpful for global equities. It also drove global bond yields down to unprecedented levels, which has increased the relative income attractions of equities,” wrote Citi strategists in a note.

“These two opposing forces are likely to keep share prices trapped in the current trading range. While Citi strategists collectively forecast a 7 percent rise in global equities by mid-2017, investors could probably generate a better return if they wait for the next dip.”

Even on Wall Street, where stocks had their worst start to the year ever only to rally back to a record high, in large part on optimism about the economy, many are now cautious, especially ahead of a presidential election in November. [EPOLL/US]

“It’s Brexit one day, election issues the next. We’ve been telling clients to sort of buckle up,” said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management.

However, with increasing central bank ownership of a government bond market limited in size by fiscal restraint, stock and bond prices are likely to continue rising, simply because the money that’s been created has to go somewhere.

The European Central Bank also has both feet on the accelerator, having launched its latest aggressive expansion to its stimulus well before the Brexit vote. Now many are speculating it may have to consider doing even more to make sure the euro zone economy doesn’t veer off track as a result.

Perhaps unexpectedly, the most optimistic outlook appears to be for Japan, where stocks have been beaten down by a soaring yen and a moribund economy. [EPOLL/JP]

In addition to a much lengthier and more aggressive central bank stimulus program than in Europe, more fiscal stimulus is in the pipeline there after elections at the weekend where Prime Minister Shinzo Abe was victorious.

Indian shares are also expected to perform well on relative stability compared with other Asian economies, although forecasts are markedly less optimistic for the remainder of the year than those taken three months ago. [EPOLL/IN]

For Asia more widely, as well as Latin America, forecasters were less upbeat, looking past the U.S. presidential election and potential near-term trouble as a result of Brexit to peg 2017 for a rebound. [EPOLL/ASIA] [EPOLL/BR]

“There are likely to be more periodic sell-offs in risky assets in the months ahead, but we do not expect these to prevent EM (emerging market) stocks from performing reasonably well,” wrote David Rees, senior markets economist at Capital Economics.

“If anything, the vote for ‘Brexit’ appears likely to ensure that global monetary conditions remain looser for longer,” he wrote. “This, along with relatively low valuations, will support EM equities in the next 18 months.”

(Poll data: <EQUITYPOLL1>)

(Other stories from the Reuters global stock markets poll:)

(Additional reporting and polling from reporters in Seoul, Shanghai, Sydney, Tokyo, London, Frankfurt, Milan, Moscow, Johannesburg, New York, Brasilia, Sao Paulo, Toronto and Bengaluru; Editing by Adrian Croft)

Wall St. declines as growth worries, oil weigh

By Marcus E. Howard

(Reuters) – Wall Street stocks fell in afternoon trading on Tuesday as investors faced continued uncertainty in Europe and tumbling oil prices weighed on energy shares.

The Bank of England said the outlook for Britain’s financial stability after its June 23 vote to leave the European Union, dubbed Brexit, was “challenging” and said it would lower the amount of capital that banks were required to hold in reserve in order to allow them to keep lending.

“After a surprisingly big bounce last week, I think we’re in a little bit of a risk-off trading today – the uncomfortable feeling that maybe all is not fully well given Brexit,” said Jeffrey Carbone, senior partner, Cornerstone Financial Partners, in Cornelius, North Carolina.

Seven of the 10 major S&P sectors were lower. The energy sector <.SPNY> fell 2.4 percent. The materials index <.SPLRCM> was down 2 percent.

The financial sector <.SPSY> was down 1.9 percent with JPMorgan <JPM.N>, Wells Fargo <WFC.N> and Citigroup <C.N> falling between 2.4 and 3.8 percent.

Oil prices <LCOc1> <CLc1> also slipped more than $2 per barrel as a potential economic slowdown weighed on prospects for demand.

Tepid U.S. data added to overall growth worries. Data showed new orders for U.S. factory goods fell in May on weak demand for transportation and defense capital goods.

New orders for manufactured goods declined 1.0 percent after two straight months of increases, according to the U.S. Commerce Department.

At 2:20 p.m. (1820 GMT), the Dow Jones industrial average <.DJI> was down 130.39 points, or 0.73 percent, to 17,818.98, the S&P 500 <.SPX> had lost 17.28 points, or 0.82 percent, to 2,085.67 and the Nasdaq Composite <.IXIC> had dropped 50.52 points, or 1.04 percent, to 4,812.04.

Investors have been seeking safe-haven assets in an uncertain economic environment. Weak data from China added to the nervousness stemming from Britain’s vote to leave the EU.

Data from China showed services sector activity hit an 11-month high in June but a composite measure of activity including manufacturing fell to its lowest in four months.

Tesla’s <TSLA.O> shares fell 1.8 percent to $212.67 after the electric car maker missed vehicle delivery targets for the second consecutive quarter.

Netflix <NFLX.O> rose 0.8 percent to $97.45 after it reached an agreement with Comcast <CMCSA.O> for its services to be available on the cable company’s set-top box. Comcast was down 1 percent at $64.60.

Declining issues outnumbered advancers on the NYSE by 2,267 to 742, for a 3.06-to-1 ratio on the downside; on the Nasdaq, 2,075 issues fell and 717 advanced for a 2.89-to-1 ratio favoring decliners.

The S&P 500 posted 66 new 52-week highs and one new low; the Nasdaq recorded 61 new highs and 29 new lows.

(Additional reporting by Yashaswini Swamynathan and Tanya Agrawal in Bengaluru; Editing by Don Sebastian and James Dalgleish)

Wall Street falls with oil, worries about global economy

By Caroline Valetkevitch

(Reuters) – U.S. stocks extended losses into a second day on Friday following another drop in oil prices and rising worries about the global economy ahead of Britain’s referendum on whether to stay in the European Union.

Ahead of Britain’s referendum on June 23, a poll showed those in favor of Britain exiting the EU, or “Brexit,” were well ahead of those who favor remaining. The British pound fell against the dollar.

“The inability of the S&P to even hold key resistance tells you the market is not ready to break out to new record highs,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“The global economy is weak and it can’t handle any major shocks. If Brexit occurs, that’s a major shock.”

The S&P energy index <.SPNY> was down 2.2 percent, leading sector losses.

At 3:14 p.m., the Dow Jones industrial average <.DJI> was down 165.18 points, or 0.92 percent, to 17,820.01, the S&P 500 <.SPX> lost 25.36 points, or 1.2 percent, to 2,090.12 and the Nasdaq Composite <.IXIC> dropped 77.64 points, or 1.57 percent, to 4,880.98.

Investors around the world swapped equities for less risky assets such as U.S. Treasury bonds and the Japanese yen. Yields on government bonds fell globally, to record lows in some cases, while the S&P financial index <.SPSY> was down 1.5 percent.

Jeffrey Gundlach, chief executive of DoubleLine Capital, said Friday investors are dropping risky assets because of falling global GDP expectations, fueled by China’s slowing growth and the intensifying U.S. presidential race.

Some stock investors are betting on a return of the volatility that marked the first two months of the year. The bounce-back in commodity prices that fueled much of the 13.3-percent rally in the Standard & Poor’s 500 index since its February lows is leveling off.

The CME Volatility index <.VIX>, Wall Street’s fear gauge, jumped 17.6 percent.

Among Wall Street’s few bright spots on Friday was Intel <INTC.O>, up 0.4 percent. Bloomberg reported the chipmaker would replace Qualcomm as an Apple <AAPL.O> supplier for some iPhones. Qualcomm <QCOM.O> was down 2.4 percent.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza and Nick Zieminski)

Wall Street falls as consumer stocks take a hit

By Noel Randewich

(Reuters) – U.S. stocks fell on Friday as a decline in oil prices added to pressure from consumer companies after gloomy earnings reports from Nordstrom and J.C. Penney overshadowed upbeat April retail sales data.

The decline in the department stores’ shares marked the end of a week that highlighted the expanding clout of Amazon.com and the plight of brick-and mortar retailers struggling to keep up.

Crude prices slipped on Friday as a strong dollar weighed and investors cashed in on gains from a three-day rally.

That pushed the S&P energy index down 1.07 percent.

U.S. retail sales jumped 1.3 percent last month, the largest gain since March 2015 and a bigger rise than economists expected, the U.S.

But consumer stocks, which have already been under pressure this week after a string of feeble earnings reports, fell again after Nordstrom and J.C. Penney reported lower-than-expected sales.

Nordstrom slumped 13.60 percent and J.C. Penney Co Inc lost 3.78 percent. Dillard’s Inc, which gave a quarterly report that also disappointed Wall Street, fell 1.62 percent.

Amazon lost 0.96 percent but was still up 5.5 percent for the week following steady gains since last Friday.

Macy’s rose 0.38 percent after its poor quarterly report on Wednesday triggered a selloff in U.S. retailers.

First-quarter earnings reports are nearly all in and, on average, have not been quite as bad as expected. The S&P 500 is trading at about 16.5 times expected earnings, according to Thomson Reuters.

“It’s hard to make a case that you’re going to have stellar equity market performance. In the context of low interest rates, equity valuations look about right,” said Mark Heppenstall, chief investment officer at Penn Asset Management in Horsham, Pennsylvania.

At 2:35 pm, the Dow Jones industrial average was down 0.99 percent at 17,545.59 points and the S&P 500 had lost 0.85 percent to 2,046.66. The Nasdaq Composite dropped 0.45 percent to 4,715.91.

All of the 10 major S&P sectors fell, led by a 1.38 percent decline in the consumer staples index.

Nvidia surged 14.7 percent after the graphics chipmaker forecast better-than-expected revenue for the current quarter.

Declining issues outnumbered advancing ones on the NYSE by 2,022 to 930. On the Nasdaq, 1,660 issues fell and 1,081 advanced.

The S&P 500 index showed 15 new 52-week highs and 8 new lows, while the Nasdaq recorded 27 new highs and 65 new lows.

(Additoinal reporting by Tanya Agrawal and Yashaswini Swamynathan; Editing by Chizu Nomiyama)

Wall Street Opened Lower on Tuesday with weak Chinese data

By Tanya Agrawal

(Reuters) about the health of the global economy.

Activity at China’s factories shrank for the 14th straight month in April as demand stagnated, a private survey showed.

Australia’s central bank also sprang a surprise by cutting interest rates to a record low of 1.75 percent, the first easing in a year as it seeks to restrain a rising currency and insulate the economy from creeping deflation.

“The negative news out of China and Australia having to stimulate its economy again is spooking the market today,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“The market is in the midst of a pullback and nervous about lower growth, which might mean weaker earnings in the coming quarters.”

At 9:39 a.m. ET (1339 GMT) the Dow Jones industrial average was down 130.46 points, or 0.73 percent, at 17,760.7, the S&P 500 was down 14.51 points, or 0.7 percent, at 2,066.92 and the Nasdaq Composite was down 32.71 points, or 0.68 percent, at 4,784.88.

Nine of the 10 major S&P sectors were lower, with the energy index’s 1.48 percent fall leading the decliners.

Oil prices fell as rising output from the Middle East and North Sea renewed concerns about a global supply overhang. [O/R]

The S&amp 500 has jumped 14 percent since mid-February, helped by recovering oil prices and an accommodative Federal Reserve. However, the index faltered last week, weighed down by lackluster earnings and mixed economic data.

Although first-quarter earnings from S&P 500 companies have mostly beaten analysts’ expectations, they are still expected to fall 5.7 percent from a year earlier, according to Thomson Reuters data.

The Fed, which held monetary policy steady last week, is focusing on data, while keeping the door open for a rate hike in June.

The United States could see two further interest rate hikes this year but uncertainties abound including the impact on the economy should Britain vote to leave the European Union, Atlanta Fed President Dennis Lockhart said on Tuesday.

Still, traders are pricing in only one rate hike at the end of the year.

Investors will be keeping an eye on unemployment numbers at the end of the week for signs confirming that the labor market continues to gain in strength.

Shares of drugmaker Pfizer were up 2.2 percent at $33.50 after the company reported a rise in quarterly revenue.

American International Group fell 2.3 percent to $55.22 after reporting a lower-than-expected profit for the third straight quarter.

Declining issues outnumbered advancing ones on the NYSE by 2,217 to 485. On the Nasdaq, 1,729 issues fell and 568 advanced.

The S&amp 500 index showed five new 52-week highs and one new low, while the Nasdaq recorded seven new highs and 16 new lows.

(Reporting by Tanya Agrawal; Editing by Anil D’Silva)

Wall St. flat as earnings fail to excite investors

By Abhiram Nandakumar

(Reuters) – U.S. stock indexes were flat on Friday after poor quarterly reports from technology bellwethers Microsoft and Alphabet outweighed gains from steadying oil prices.

Microsoft was the biggest drag on all three major indexes.

Crude rose about 1 percent on signs of strong gasoline consumption in the United States. [O/R]

With recent economic data indicating a sluggish pace of economic growth globally and crude prices hovering near five-month highs, earnings have become a swing factor for stocks.

The S&P 500 has staged a sharp recovery from a steep selloff earlier this year and is inching toward its all-time high, helped by a recent rebound in oil, a cautious Federal Reserve and companies beating tempered expectations.

The index is up half a percent for the week, having posted gains on the first three days.

“We’re back to the every other day theory, bouncing around a little, but I don’t see too strong a sentiment either way,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“It’s still a very cautious environment,” Brown said, adding that the negative tone from the quarterly reports were expected.

At 9:42 a.m. ET, the Dow Jones industrial average was up 11.91 points, or 0.07 percent, at 17,994.43, the S&P 500 was down 1.52 points, or 0.07 percent, at 2,089.96 and the Nasdaq Composite was down 35.84 points, or 0.72 percent, at 4,910.05.

Eight of the 10 major S&P sectors were higher, but the index was under pressure by a 1.4 percent decline in the technology sector

Alphabet and Microsoft were down 3.7 and 6.5 percent respectively after both missed profit and revenue estimates.

S&P 500 companies are seen posting a 7.2 percent fall in first-quarter profit, according to Thomson Reuters I/B/E/S, and shares of companies failing to beat the already lowered expectations are getting hammered.

McDonald’s rose 0.7 percent to $126.63 after the company’s profit beat estimates.

General Electric was off 1.1 percent at $30.63 after it reported lower organic revenue.

Caterpillar shares were down 0.6 percent at $78.16 after its results.

Starbucks slipped 3 percent after missing sales expectations, while Visa was down 2.3 percent after it cut full-year revenue forecast.

Advancing issues outnumbered decliners on the NYSE by 1,885 to 761. On the Nasdaq, 1,460 issues rose and 740 fell.

The S&P 500 index showed six new 52-week highs and no new lows, while the Nasdaq recorded 19 new highs and six lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)

Dollar drops to eight-month low as commodity currencies climb

By Jemima Kelly

LONDON (Reuters) – The dollar fell to its weakest since late August against a basket of currencies on Tuesday, while commodity-linked currencies climbed, as a rise in oil prices whetted investors’ appetite for riskier assets across financial markets.

The greenback has been subject to a heavy sell-off over the past month, losing 5 percent <.DXY> as investors have pushed back their expectations for when the Federal Reserve will raise U.S. interest rates after Chair Janet Yellen threw into doubt the view there could be two hikes this year.

Fed funds futures <0#FF:> imply barely one quarter point increase for the whole of 2016, with only about a 20 percent chance of a hike in June priced in.

The dollar index <.DXY>, which measures the greenback against a basket of six major currencies, fell to as low as 93.627.

With a rise in commodity prices and rallying global stocks boosting investors’ assets for riskier assets, commodity-linked currencies such as the Australian dollar <AUD=D4> and Norwegian crown <NOK=> gained strongly against their U.S. counterpart, further bruising the greenback.

“It appears that for now, markets are turning their noses up at the prospect that more gloomy earnings that might trigger some more negative risk sentiment,” said Rabobank currency strategist Jane Foley in London, adding that the dollar’s sell-off looked a little “overdone”.

Against the safe-haven yen, though, the dollar strengthened 0.3 percent, having hit a 1-1/2-year low of 107.63 yen <JPY=D4> on Monday. The yen had its strongest start to a year since 2008 in the first quarter <JPY=> as shaky global markets boosted demand for the traditional safe-haven currency.

Those gains prompted Japanese officials to warn on Monday that the yen moves were “one-sided and speculative” and that the government stood ready to intervene to weaken the currency.

But with oil prices hitting a 2016 high above $43 per barrel on Tuesday and risk appetite on the rise, the yen needed no such intervention to drive it lower. [O/R]

“(Higher) oil prices … have got the dollar on the back foot, more than anything else, so we have the yen and the dollar at the bottom, and everything else at the top,” said Kit Juckes, macro strategist at Societe Generale in London.

“I think dollar/yen will get back to 120 at some point – we might want to sell it again there, but I think this move is way overdone,” he added.

As the dollar sold off, the euro touched a six-month high of $1.1465 <EUR=>.

(Additional reporting by Ian Chua in Sydney and Hideyuki Sano in Tokyo; Editing by Andrew Heavens)

Oil set for weekly loss as huge supplies cut short rally

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma

By Barani Krishnan

NEW YORK (Reuters) – Oil prices fell to below $40 a barrel on Thursday, on track to their first weekly loss in over a month, pressured by record high U.S. stockpiles, weakening equity markets and a strong dollar.

With crude futures losing as much as 6 percent since Tuesday’s settlement – their biggest slide in two days since mid-February – analysts said the oil rally of the past five weeks that brought prices up from mid-$20 levels may be unraveling.

U.S. government data on Wednesday showed crude stockpiles jumped 9.4 million barrels last week – three times more than forecast by analysts in a Reuters poll.

A senior executive from the International Energy Agency, meanwhile, said a deal among a few OPEC producers and Russia to freeze production was likely to be “meaningless” as Saudi Arabia was the only one with the ability to raise output.

Brent crude’s front-month contact <LCOc1> was down 61 cents, or 1.5 percent, at $39.86 a barrel by 11:08 a.m. EST. It was on track to a 3 percent drop on the week, its biggest weekly slide since mid-January.

U.S. crude’s front-month <CLc1> fell 90 cents to $38.89. For the week, it was poised to lose about 2 percent, its first weekly loss since mid-February.

Earlier this week, both the benchmarks were up more than 50 percent from multi-year lows hit in January.

“A dose of reality (has) derailed the current perception (of a) rally, at least for the time being,” said Dominick Chirichella, analyst at New York’s Energy Management Institute.

The market will look out for a weekly reading on the U.S. oil drilling rig count due after 1:00 p.m. EST. A production indicator, the rig count rose last week after 12 weeks of cuts.

Shares on Wall Street <.SPX>, trading in tandem with crude most of this year, headed for their first weekly drop in six weeks. Financial markets were broadly risk averse with volumes thin ahead of the Good Friday and Easter break.

The dollar’s <.DXY> first weekly gain since late February also made oil and other commodities denominated in the greenback less affordable to holders of the euro and other currencies.

Trading houses were betting on oil being oversupplied at least two more years, while Russia looked to export more crude to Europe in April than any month since 2013.

Scott Shelton, energy broker at ICAP in Durham, North Carolina, feared of big builds in U.S. distillates, which include heating oil and diesel, as refineries emerge from maintenance. “We need to export large quantities of distillate,” he said. “Production has not fallen enough.”

(Additional reporting by Simon Falush in LONDON; Editing by Marguerita Choy)

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