Tag Archives: Oil Prices

Stock futures drop after Britons vote to abandon EU

Trader at BGC

By Tanya Agrawal and Yashaswini Swamynathan

(Reuters) – U.S. stock futures slid in premarket trading on Friday after Britain’s vote to quit the European Union delivered the biggest blow to the global financial system since the 2008 financial crisis.

S&P 500 futures and Nasdaq futures were down about 3.5 percent while those on the Dow Jones industrial average were off 2.8 percent, indicating Wall Street will open sharply lower.

By 8 a.m. ET (1200 GMT), the number of contracts traded on S&P futures had neared their daily average for the past year.

Investors worried about damage to the world economy sought refuge in the dollar and other safe-harbor assets such as gold and U.S. Treasury bonds, while dumping riskier shares. The yield on the U.S. 10-year bond hit its lowest since 2012.

Banks were among the biggest losers.

Britain’s FTSE 100 stock index was down 4.5 percent in early afternoon trading. Asian stocks also tumbled.

Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October.

“The markets are going to trade violently and erratically through the day and it’s going to be a challenging equity environment until investors get greater clarity on the matter,” said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

Citigroup <C.N>, Bank of America <BAC.N>, JPMorgan <JPM.N> and Goldman Sachs <GS.N> slumped by between 6.2 percent and 7.2 percent. U.S. banks have large operations in London.

Trading in S&P 500 and Nasdaq futures was halted briefly overnight after they fell more than 5 percent, triggering limit thresholds.

U.S. short-term interest rate futures rose amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout.

Investors have been waiting for the Fed to raise borrowing costs as the economy improves.

“It’s too early to assess whether we will have a negative interest rate environment. However, given the knee-jerk global response in the markets, it would seem that low interest rates are here to stay,” said Bakhos.

Fed Chair Janet Yellen said earlier in the week that an exit of Britain from the EU would have “significant repercussions” on the U.S. economic outlook.

Futures on the VIX <.VIX> volatility index – known as Wall Street’s fear gauge – surged 42.3 percent to 24.52, above its long-term average of 20.

The market was already expected to be volatile on Friday as traders adjust portfolios to account for an annual reconstitution of the widely followed Russell stock indexes.

Oil prices also slumped, dropping about 5 percent, the biggest drop since early February. [O/R] Exxon <XOM.N> and Chevron <CVX.N> were down about 3 percent each.

Among gold miners, Barrick Gold <ABX.N> was up 9.3 percent and Newmont Mining <NEM.N> was up 8 percent.

Apple <AAPL.O>, which got more than a fifth of its revenue from Europe last quarter, was down 2.7 percent at $93.48. Facebook <FB.O> was down 3.4 percent at $111.19

U.S. stocks had risen in recent sessions as investors bet that Britain would remain part of the EU.

As of Thursday’s close, the S&P 500 index had risen 3 percent since the start of the year.

Futures snapshot at 8:10 a.m. ET (1210 GMT):

* S&P 500 e-minis <ESc1> were down 73.25 points, or 3.48 percent, with 1,612,911 contracts traded.

* Nasdaq 100 e-minis <NQc1> were down 158.5 points, or 3.55 percent, on volume of 156,665 contracts.

* Dow e-minis <1YMc1> were down 504 points, or 2.81 percent, with 207,671 contracts changing hands.

(Additional reporting by Noel Randewich, Richard Leong and Rodrigo Campos; Editing by Alison Williams and Ted Kerr)

At $50 barrel, oil risks ‘reverse Goldilocks syndrome’

Worker looks at pump jack at oil field Buzovyazovskoye owned by Bashneft company north from Ufa

By Amanda Cooper

LONDON (Reuters) – Oil’s battle to reclaim $50 a barrel may have left it in a sticky situation, where the price is too low to lure fresh investor bulls and too high to force more production offline.

Global oil production has fallen by nearly 1 million barrels per day in the last year to just over 95 million bpd, based on International Energy Agency figures. Demand is expected to reach 96.7 million bpd this quarter, up more than 1 million bpd in that time.

An abrupt rise in unplanned production outages, caused by wildfires in Canada, as well as political and economic havoc in Nigeria, Venezuela and Libya fueled a 75 percent rally in the last six months, surpassing $50 for the first time since the height of the U.S. subprime crisis in early 2009.

Emboldened by the prospect of a stubborn overhang of unwanted crude possibly disappearing more quickly than originally thought, investors ploughed back into oil, raising their bullish price bets to all-time highs in April in the case of the Brent market. [O/ICE]

With oil now around the pivotal $50 point, some of this enthusiasm appears to have cooled, while on the supply front, part of that disrupted output is returning.

More worryingly for the bulls, there are signs that U.S. shale production, which is nimbler than conventional output, could be about to pick up again. [RIG/U]

“It’s ‘reverse Goldilocks’ – it’s not hot enough and it’s not cold enough. If you’re bearish, it’s not low enough for the bears and it’s not high enough for the bulls. Ergo, ($50) is the one number you don’t stick at,” Paul Hornsell, head of commodities research at Standard Chartered, said.

Weekly U.S. exchange data showed money managers raised their short positions in U.S. crude oil futures and options for the first time in a month last week, and by the largest amount since mid-January.

In fact, it was the break below $50 a barrel in late 2015 that unleashed a dizzying increase in net short positions – over 140 million barrels’ worth in just three months, the most aggressive build on record.

LIGHT, SWEET SPOT?

“It leaves the market to think we are in a bit of a ‘sweet spot’ at the moment,” Saxo Bank senior manager Ole Hansen said.

“$52 and above is probably not seen as being sustainable at this stage and, at the same time, investors looking for a continued bounce into 2017 will probably look at any weakness as a buying opportunity.”

The decision by the Organization of the Petroleum Exporting Countries in late 2014, led by Saudi Arabia, to let oil fall enough to force higher-cost producers out of business has slashed U.S. shale output by nearly 1 million bpd in a year.

Spending cuts in the oil and gas industry topped $100 billion last year, when the drop in crude prices accelerated the fastest, falling 60 percent to below $50.

Analysts at Bank of America-Merrill Lynch believe that with Saudi Arabia relinquishing its role as the effective “central bank of oil”, when it would adjust supply from one month to the next to keep the global oil market in balance, the demand side of the equation will prove a key price driver.

The bank’s team notes that demand reacts to oil price changes on average over 12 to 24 months, while supply outside OPEC and North America responds to price changes over a two- to six-year time frame.

“Global oil supply elasticities kick in over a multi-year window … suggesting higher prices may be needed to slow down demand in 2017,” Bank of America-Merrill Lynch’s analysts wrote.

(Reporting by Amanda Cooper; Editing by Dale Hudson)

Wall Street falls with oil, worries about global economy

NYSE workers

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)

Oil tops $50, lifts commodity stocks

Visitors looks at an electronic board showing the Japan's Nikkei average at the Tokyo Stock Exchange i

By Nigel Stephenson

LONDON (Reuters) – Brent crude oil topped $50 a barrel for the first time in nearly seven months on Thursday, lifting commodity and energy-related shares in Europe and Asia, though worries about U.S. interest rates and signs of slowdown in China limited gains.

Oil’s rise took it to levels more than 80 percent above January’s 12-year lows and was fueled in part by a weaker dollar, which fell against the Japanese yen.

European shares edged higher, led by the basic resources and oil and gas sectors. The pan-European FTSEurofirst 300 index rose 0.1 percent, pushing on from a four-week high hit on Wednesday. The STOXX 600 basic resources index rose 2.6 percent. Oil and gas added 0.4 percent.

Wall Street looked set to open with modest gains, according to index futures.

Within Europe, gains of 0.5 percent in Germany’s DAX index and 0.4 percent in France’s CAC 40 were offset by losses of 0.6 percent in Spain’s IBEX and 0.3 percent in Italy’s FTSE MIB index.

Japan’s Nikkei rose 0.1 percent, giving up earlier gains as the yen firmed, while MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4 percent.

Chinese shares fell more than 1 percent at one point, with the CSI300 index touching its lowest since March 11 after data on Thursday showed profits at state-owned firms fell 8.4 percent year-on-year in the first four months of 2016, while debts rose 18 percent. However, a late rally saw the index close 0.2 percent higher.

Brent, the international benchmark oil price, rose as high as $50.35 a barrel, its highest since early November, in the wake of data showing a sharper-than-expected fall in U.S. crude stocks last week.

U.S. crude last traded at $49.90, up 34 cents.

“Geopolitical issues in West Africa and the Middle East, supply outages, increased demand and maybe a touch of a weaker dollar have all helped push prices higher,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

He added, however, that the rally would not last as the higher prices would bring U.S. shale oil back on to the market.

In currency markets, the yen rose 0.2 percent to 110 per dollar and the euro was up 0.3 percent at $1.1182.

“Stuck in a corridor is a good word for the yen at the moment,” said Geoffrey Yu, a strategist with the UBS in London.

“For Japan the question is what will we see next from them to ensure that the yen can stay weak.”

The greenback hit a two-month high against a basket of currencies on Wednesday, and is on a roll after minutes of the Federal Reserve’s latest policy meeting and comments from Fed officials hinted that an interest rate rise could be imminent.

The cost of hedging against big swings in sterling over the next month hit seven-year highs on Thursday, according to options set to mature just after Britain’s June 23 referendum on European Union membership.

LOOKING TO YELLEN

Investors are looking to a speech by Fed Chair Janet Yellen on Friday for more clues to the rate outlook.

Yields on two-year U.S. Treasuries hit 10-week highs around 0.94 percent on Wednesday. They last stood at 0.91 percent down 1 basis point on the day.

German 10-year yields, the benchmark for euro zone borrowing costs, rose about 2 bps to 0.17 percent.

The market is already turning to next Thursday’s European Central Bank policy meeting, at which it will unveil new growth and inflation forecasts.

Higher oil prices have helped lift a gauge of long-term inflation expectations often cited by the ECB – the five-year, five-year breakeven rate EUIL5Y5Y=R&gt; – above 1.5 percent, though this remains below the ECB’s inflation target of near 2 percent.

(Additional reporting by Hideyuki Sano in Tokyo, Anirban Nag and Alistair Smout in London; Editing by Toby Chopra)

Oil up as Canada, Nigeria problems counter stockpile concern

Pumpjacks and other infrastructure for producing oil dot fields outside of Watford City, North Dakota

y Amanda Cooper

LONDON (Reuters) – Oil rose on Tuesday, boosted by supply disruptions in Canada and elsewhere that have knocked out 2.5 million barrels of daily production and temporarily eclipsed concern over high global inventories and a looming surplus of refined products.

Brent crude futures &lt;LCOc1&gt; were up 39 cents on the day at $44.02 per barrel by 1200 GMT, while U.S. crude futures &lt;CLc1&gt; were virtually flat at $43.38 per barrel.

In spite of output outages from Canada to Nigeria, oil prices are down by more than 2 percent so far this week, hampered by worries that even hefty dents to production will have little effect on the growth of stocks of unwanted crude.

Weekly data on speculative holdings of crude futures has shown investors are cooling a little toward oil.

“We’ve seen the market slump 10 pct from the highs since this (Canada) news came in, which suggests that there are other fish to fry at the moment,” Saxo Bank senior manager Ole Hansen said.

“The big reaction yesterday to the change in Canada gave an indication that the market has become a bit more focused on selling into rallies…”

Oil prices fell on Monday by as much as 3.8 percent at one point, after the wildfire moved away from the oil sounds town of Fort McMurray in the western Canadian province of Alberta.

Outages in Canada, which consultancy Energy Aspects said now totaled 1.6 million barrels per day (bpd), have brought global disruptions to more than 2.5 million bpd since the beginning of the year. This has at least temporarily wiped out a surplus that emerged in mid-2014 and slashed 70 percent off prices before a recovery started early this year.

A series of attacks on Nigeria’s oil infrastructure has pushed its output of crude close to a 22-year low, Reuters data shows, piling pressure on its finances.

“Despite some significant supply disruptions, most notably in Canada, ongoing bearish fundamentals precipitated a modest retracement in prices,” Societe Generale said in a weekly note to clients.

With plenty of crude available, refiners have produced large volumes of gasoline and diesel, threatening to swamp demand despite the coming U.S. summer driving season.

“Crude cannot go up without support from products, and that support is not there at the moment, and more refineries are coming out of turnarounds so there will be more products and tanks are getting full,” said Oystein Berentsen, managing director for crude at Strong Petroleum in Singapore.

(Additional reporting by Henning Gloystein in SINGAPORE; Editing by David Evans and William Hardy)

U.S. Federal Reserve set to keep rates unchanged

Federal Reserve Chair Janet Yellen holds a press conference in Washington

By Lindsay Dunsmuir

WASHINGTON (Reuters) – The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday as it continues to monitor the impact from weakening global growth but may seek to signal to markets it is determined to resume policy tightening this year.

The Fed has held its overnight lending rate for banks at a target range of between 0.25 and 0.50 percent since it lifted the benchmark interest rate for the first time in a decade from near zero last December.

Since then the Fed has signaled more caution, despite the U.S. economy’s relative strength, as concerns a slowing China would depress global growth sparked steep stock price declines and tighter financial market conditions early in the year.

Fed officials reconvened Wednesday morning as scheduled for the second day of the two-day meeting, a Fed spokesperson said. A policy decision statement is due to be released at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is not scheduled to hold a press conference.

Markets have turned up since the last rate decision in March. The S&amp;P 500 [.SPX] has risen more than 14 percent since mid-February. China’s economy has also shown more positive signs, growing at a 6.7 percent pace in the first quarter.

A Reuters poll of more than 80 economists showed expectations were for two rate increases this year, with the possibility the Fed will hike in June.

Additionally, some of the pressures that have kept inflation lower than the Fed would like have abated. Oil prices have rallied, with the Brent benchmark crude [LC0c1] up 20 percent to around $44 a barrel since the Fed’s December rate hike, while the dollar has dropped around 4 percent against a basket of currencies during the same period.

Those factors may allow the Fed to reinstate a balance of risks assessment in its statement, most likely a description of the risks to the U.S. economic outlook as “nearly balanced.”

Such phrasing is usually seen as prerequisite to policymakers even considering another rate rise. However, the U.S. central bank has tried to move away from forward guidance as it implements rate hikes.

The Fed may also acknowledge the recent improved market indicators by dropping or softening its March warning that global economic and financial developments “continue to pose risks.”

“If anything, Fed officials will likely want to encourage markets to price in more tightening than is being priced in currently,” said Jim O’Sullivan, an economist at High Frequency Economics, in a note.

Investors currently see zero chance the Fed will raise rates at this week’s meeting and see a 23 percent probability of a hike in June, according to an analysis of Fed Fund futures by the CME Group.

EYE ON THE DATA

The Fed may be wary of making too strong a judgment on the resilience of the U.S. economy come June until it has more data.

The global situation has already caused the Fed rate setters to dial back their estimates on the number of rate rises this year. Predictions from policymakers now show two, compared to four last December.

Other major central banks are grappling with ways to deal with lackluster growth. The Fed remains concerned that with interest rates still close to zero it would have to rely on more unconventional policy tools should the economy slow.

Last week the European Central Bank kept its main refinancing rate at zero and its bank overnight deposit rate in negative territory.

The Bank of Japan could cut its rates further into negative territory when it meets on Thursday.

U.S. data in the pipeline includes the initial estimate of first-quarter gross domestic product growth on Thursday, which is expected to be weak. Economists polled by Reuters predict 0.7 percent growth for the first quarter. The Fed will look for signs over the next few weeks that the economy is accelerating for the second quarter.

Another strong monthly jobs report in just over a week’s time could assuage concerns as would evidence a recent uptick in inflation is being maintained.

As such if there isn’t a balance of risks reinserted into April’s statement, “Fed officials could still use their speeches to manage market expectations higher,” if they decide on June, said Sam Bullard, an economist at Wells Fargo.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Strike jumps oil prices more than 3 percent

Kuwaiti oil sector employees sit in a shaded area on the first day of an official strike called by the Oil and Petrochemical Industries Workers Union over public sector pay reforms, in Ahmadi

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices jumped more than 3 percent on Tuesday after a strike by workers in Kuwait nearly halved the OPEC member’s crude production, overshadowing bearish sentiment after Sunday’s failure by producers to agree to freeze output levels.

Thousands of Kuwaiti oil workers downed tools for a third day on Tuesday to protest against planned public sector pay reform, cutting crude output to 1.5 million barrels per day (bpd), according to an oil spokesman cited by news agency KUNA.

That is little more than half of Kuwait’s average output of 2.8 million bpd in March.

Reports of power outages leading to output declines of about 200,000 bpd in Venezuela and a pipeline fire in Nigeria that may have cut production by 400,000 bpd, along with the upcoming refinery maintenance season boosted the rebalancing of market and was supporting prices, traders said.

“The Kuwait strike in particular is a major factor. It was a bolt out of the blue in terms of how much oil came off the market so quickly,” said John Kilduff, partner at Again Capital, a New York energy hedge fund.

“Usually these things have a ramp down period but this seems to be able to flick a switch…It’s supportive for the market for now”

Brent crude futures &lt;LCOc1&gt;, the global benchmark, traded at up $1.29 at $44.20 a barrel by 11:20 a.m. EST. U.S. crude futures &lt;CLc1&gt; rose $1.47 to $41.25 a barrel.

The rally was catalyzed by the S&amp;P 500 index &lt;.SPX&gt; crossing a key level that triggered buying in oil and across commodities.

Analysts, however, said Kuwait’s disruption would likely be brief and investors would soon focus back on the market’s oversupply given the failure of major exporters on Sunday to agree to freeze output to avoid worsening the glut.

“In the coming days oil production is likely to partially recover from its initial drop as non-striking staff are redistributed and inventories drawn upon, avoiding a force majeure on loadings,” policy risk consultancy Eurasia Group said.

A deal to freeze oil output by OPEC and non-OPEC producers fell apart at the weekend meeting in Doha after Saudi Arabia demanded Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.

Iran has repeatedly said it would prioritize regaining pre-sanctions crude output levels over discussing an output freeze.

Tehran’s crude oil exports have risen to around 1.75 million bpd so far in April, according to an industry source and shipping data. Exports averaged about 1.6 million bpd in March

Other exporters who participated in the failed Doha talks have already shifted attention back to their own interests. Russia and Venezuela have indicated they hope to increase output this year.

(Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Marguerita Choy)

Oil Prices Dip as banks caution on impact of producers meeting

Pump jacks are seen at the Lukoil company owned Imilorskoye oil field, as the sun sets, outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin

By Karolin Schaps

LONDON (Reuters) – Oil prices slipped on Monday after banks dampened hopes that the meeting of producers in Doha next Sunday, aimed at freezing current output levels, would improve the demand-supply balance.

Brent crude futures, the global benchmark, fell by 10 cents to $41.84 a barrel by 1208 GMT, retreating from last week’s rally to a three-week high reached on Friday after a drop in the rig count of U.S. drillers to its lowest since November 2009.

U.S. WTI crude also eased on Monday, falling to $39.50 a barrel, down 22 cents from the previous session.

“Prices will move back and forth this week on expectations for Doha. This morning it seems that speculation is being scaled back again,” Commerzbank senior oil analyst Carsten Fritsch said.

Analysts at Goldman Sachs, who expect oil prices to average $35 a barrel in the second quarter, cautioned that the outcome of the meeting in Qatar could prove bearish for the market.

A production freeze at recent levels would not accelerate a rebalancing of the market, the analysts said, citing Russian and non-Iranian OPEC output that has remained close to the bank’s 2016 average annual forecast of 40.5 million bpd.

Azerbaijan, the energy minister of which will attend the Doha meeting, said on Monday that its output had dropped by 1.6 percent in the first quarter compared with a year earlier to 10.496 million tonnes.

Barclays, meanwhile, gave warning that the Doha meeting could have limited impact because some producers are unlikely to take part in an output freeze.

Bearish sentiment was further reflected in price expectations. BMO Capital Markets lowered its 2016 Brent and WTI price forecasts to $41 and $38 a barrel respectively, down from the $45 and $41.50.

Many oil market speculators agreed with a more bearish outlook as data from the InterContinentalExchange (ICE) showed that net long positions on Brent had been cut to 355,225 contracts in the week ending April 5.

However, analsts are forecasting firmer demnd for oil over the longer term.

Researchers at Bernstein expect global oil demand to increase at a mean annual rate of 1.4 percent between 2016 and 2020, compared with annual growth of 1.1 percent over the past decade.

“We expect oil markets to rebalance by the end of 2016. This will allow prices to recover towards the marginal cost of $60 per barrel,” Bernstein said, adding that global demand reach 101.1 million bpd by 2020, from the current 94.6 million bpd.

(Additional reporting by Henning Gloystein in Singapore; Editing by Greg Mahlich and David Goodman)

Oil prices fall as investors faith in rally wanes

By Amanda Cooper

LONDON (Reuters) – Oil prices fell on Tuesday, reflecting growing concerns that a two-month rally may be in danger of fizzling, while analysts forecast another rise to record levels for U.S. crude stockpiles.

The oil price has risen by more than 45 percent since mid-February ahead of a meeting next month of the world’s major producers to discuss an output freeze to support prices. But there is growing scepticism about the outcome of the meeting.

“The amount of verbal intervention, which has obviously helped the market greatly over the past two months, combined with a production slowdown in the U.S., has probably taken (oil) as far as it can, now the market really wants to see some action,” Saxo Bank senior manager Ole Hansen.

“We’re seeing more and more commentators raise the flag and saying ‘have we seen too much, too soon?’ in terms of the rally across the sector.”

Brent crude futures &lt;LCOc1&gt; fell by $0.96 to $39.31 a barrel by 1124 GMT (7.24 a.m. ET), having lost some six percent in the last six trading days, while U.S. crude &lt;CLc1&gt; fell 78 cents to $38.60.

OPEC and other major suppliers, including Russia, are to meet on April 17 in Doha to discuss an output freeze aimed at bolstering prices.

But with ballooning global inventories, signs some OPEC members are losing market share, plus little evidence of a strong pick-up in demand, analysts said oil is likely to trade in a range.

“There is a rebalancing on the way, but we are still running a surplus and stocks are building up as far as we can see,” SEB commodities analyst Bjarne Schieldrop said.

“There is a clear risk for a pull-back in Brent crude oil with a return to deeper contango again. Long positioning in Brent is at record high and vulnerable for a bearish repositioning.”

Data on Monday from the InterContinental Exchange showed speculators hold the largest net long position in Brent futures on record. [O/ICE]

U.S. commercial crude oil stockpiles were expected to have reached record highs for a seventh straight week, while refined product inventories likely fell, a preliminary Reuters survey showed late on Monday. &lt;API&gt;

Barclays said in a note on Monday net flows into commodities totaled more than $20 billion in January-February, the strongest start to a year since 2011, and prices could fall 20 to 25 percent if that were reversed.

(Additional reporting by Aaron Sheldrick in TOKYO; Editing by Jane Merriman and Susan Thomas)

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 &lt;LCOc1&gt; 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 &lt;CLc1&gt; 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 &lt;.SPX&gt;, 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 &lt;.DXY&gt; 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)