SEOUL, June 15 (Reuters - U.S. crude futures remained unchanged in early Asian trade on Wednesday, while ICE Brent for July delivery rose $1.04 a barrel after U.S. oil inventories showed a larger-than-expected drop for the second straight week on top of political unrest in the Middle East.

 

  FUNDAMENTALS

  * U.S. July crude < CLc1> stayed at $99.37 a barrel as of 0049 GMT.

  * In London, ICE Brent for July delivery was up $1.04 to $121.20 a barrel versus its settlement at $120.27, for the highest settlement since May 4, when front-month Brent crude closed at $121.19.

  * U.S. crude's discount against Brent crude stood at $21.84, after hitting $22.80 in the previous session, the fifth record in six sessions. < CL-LCO1=R>

  * American Petroleum Institute data showed on Tuesday that U.S. crude oil stocks dropped by 3 million barrels, with inventories in Cushing, Oklahoma, alone falling by 1.7 million barrels in the week to June 10. That was more than the 1.5 million barrel decline that analysts had forecast.

  * The EIA will issue its data at 10:30 a.m. EDT (1430 GMT) on Wednesday. An expanded Reuters analyst survey taken ahead of weekly inventory reports showed on Tuesday that U.S. crude oil inventories fell last week on lower imports and as higher margins encouraged refiners to raise utilization rates.

  * Euro zone ministers failed on Tuesday to reach agreement on how private holders of Greek debt should share the costs of a new bailout, putting the onus on the leaders of Germany and France to forge a deal later this week.

  * Yemen's Gulf neighbours renewed an offer on Wednesday to mediate in Yemen's bloody political crisis, but offered no formula to break a deadlock over the fate of wounded President Ali Abdullah Saleh.

  * Libyan rebels made fresh gains on the western front on Tuesday, pushing back forces loyal to leader Muammar Gaddafi in a string of clashes that brought them closer to the capital Tripoli. Insurgents also sought to extend an advance in the east, setting their sights on the oil town of Brega in a bid to extend their control over the region, epicentre of the four-month rebellion against Gaddafi's four-decade rule.

  * Thousands of Syrians fled the historic town of Maarat al-Numaan on Tuesday to escape tank forces thrusting into the country's north in a widening military campaign to crush protests against President Bashar al-Assad.

 

  MARKETS NEWS

  * U.S. equities rose more than 1 percent as the oversold market attracted buyers and better-than-expected retail sales data added support to trigger a relief rally.

  * The Nikkei stock average rose on Wednesday, helped by a weaker yen and U.S. retail sales figures that were not as bad as expected, while resource-related stocks gained on rising commodity prices.

  * The safe-haven Swiss franc and yen were under broad pressure in Asia on Wednesday after U.S. and Chinese data helped lift some of the gloom about the global economy, bolstering risk appetite that saw strong gains for the euro and commodity currencies. The dollar index , which tracks its performance against a basket of major currencies, retreated from a two-week high near 75.000 to last trade at 74.422.

SHANGHAI, June 15 (Reuters) - China's benchmark short-term money market rate spiked nearly 200 basis points to its highest level since late February early on Wednesday after the central bank surprised the market with a rise in banks' reserve requirement ratio (RRR).

  The weighted average seven-day government bond repurchase rate , the main barometer of short-term liquidity supply, rose to 6.1001 percent about 15 minutes after trading started, up from 4.1757 percent at the close on Tuesday.

  In a move to help fight high inflation, the People's Bank of China announced after the market closed on Tuesday a 50 basis-point RRR increase to take effect next Monday, forcing big banks to put aside a record high 21.5 percent of their deposits as required reserves. (Reporting by Lu Jianxin and Jacqueline Wong)

By Chuck Mikolajczak

  NEW YORK, June 10 (Reuters) - Don't be surprised if Wall Street racks up a seventh consecutive week of losses as the likelihood of more poor economic data and other disconcerting signals outweigh any thoughts that stocks are cheap.

  After closing at its highest level in nearly three years on April 29, the S& P 500 has tumbled nearly 7 percent on the back of a barrage of soft economic data, sparking the debate over whether the economy is headed for a double-dip, or has merely hit a soft patch in its recovery.

  The benchmark S& P 500 recorded its sixth straight weekly decline on Friday and volume has picked up, as it typically does, on down days. Another week of selling will mark the longest stretch of weekly losses for the index since 2001.

  Red flags, including ugliness in the junk bond market, options activity and the ease with which support levels have been broken suggest more selling ahead.

  " You have to be realistic. You've got to have some sort of correction to go into this marketplace just for the healthiness of the market," said Cliff Draughn, president and chief investment officer at Excelsia Investment Advisors in Savannah, Georgia.

  As stocks have declined, both investment-grade and high-yield risk premiums in the bond market have slumped as investors sought safe-haven assets.

  That's troublesome since the stock market often moves in sympathy with the junk bond market because rising borrowing costs crimp corporate profits.

  The CDX HY16 North America index for high-yield bonds, which conversely falls as risk appetite decreases, closed below par for the first time this year on Wednesday. The CDX IG16 North American investment grade index, which investors use to hedge against bond losses, hit its highest level since Nov. 30, according to Tradeweb.

  In another signal of skittishness about the market's footing, Ally Financial, an auto and mortgage lender majority owned by the U.S. government, delayed a $6 billion IPO due to bad market conditions, two sources familiar with the situation told Reuters.

  DATA BLITZ AND QUADRUPLE WITCH

  Stocks have also been easily passing through technical support levels, with the S& P 500 most recently taking out the April 18th low of 1,294.70, leaving analysts to eye the 1,250 level as the next area of support.

  And the daily volume put/call ratio for equity options on the Chicago Board Options Exchange (CBOE) hit an 18-month high on Wednesday, indicating that investors are significantly bearish on the stock market.

  On top of all that, data expected for next week, including the Producer Price Index, the Consumer Price Index, May retail sales, manufacturing surveys for New York and Philadelphia as well as the index of leading indicators of economic activity are forecast to mostly show a struggling economy.

  " It is a busy economic week, so we expect the market to both anticipate economic data and to react to the releases -- I don't necessarily see anything good coming out of the economic releases next week," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

  Several of these indicators set off the first alarm bells about the economy's health when they came out a month ago.

  By the end of the week, investors will also grapple with quadruple witching, when the options for stock-index futures, single-stock futures, equity options and stock-index options for June expire.

  " This trade will lead to increased volume and the possiblity of big moves in the market. Expiration also has the potential for increased volatility, especially intraday volatility next week," said TD Ameritrade chief derivatives strategist Joe Kinahan.

  NOT ALL SIGNS POINT DOWN

  But even with the heavy losses suffered recently, the CBOE Volatility index has remained relatively unchanged, indicating market participants have yet to push the panic button.

  " During this entire correction, the VIX hasn't budged much," said Jason Goepfert, president of sentimenTrader.com, in a report. " That could be a sign of complacency among traders, but historically a stock market correction without a spike in the VIX has been a better 'buy' signal than 'sell' signal."

  However, a turnaround in stocks could be stoked by any sign of progress in Washington on the debt ceiling and budget debates, an overhang on stocks that has frustrated market participants.

  " The biggest thing on the horizon right now is the inability of the U.S. Congress to come to some sort of conclusion over a budget," Draughn said.

  " Once that happens, that kinds of frees Bernanke's hands to where if he needs to do monetary intervention, he can. But he essentially is handcuffed at this point, due to the fact that the Treasury is happy to restrict the amount of bonds being issued for bumping up to the debt limit."

  Wall St Week Ahead appears every Friday. Questions or comments on this column can be e-mailed to: Charles.mikolajczak@thomsonreuters.com (Reporting by Chuck Mikolajczak Additional reporting by Doris Frankel and IFR analyst Rachelle Horn Editing by Jan Paschal)

(Updates with long bond up over a point in price)

  NEW YORK, June 10 (Reuters) - U.S. 30-year Treasury bonds traded over a point higher in price on Friday as worries over the pace of economic recovery and falling stocks bolstered the safe-haven value of government debt.

  The 30-year bond was trading 1-2/32 higher in price to yield 4.17 percent, down from 4.23 percent late on Thursday, while the benchmark 10-year note was 16/32 higher to yield 2.94 percent from 3.00 percent. (Reporting by Chris Reese Editing by James Dalgleish)

* Slowing Chinese exports add to global economic worries

  * U.S. crude slumps world stocks head for weekly loss

  * Lack of unity over Greece aid pressures euro (Updates prices, adds comment, details)

  By Wanfeng Zhou

  NEW YORK, June 10 (Reuters) - Major stock markets headed for their fifth weekly loss in six weeks on Friday on growing worries about the global economy, while U.S. crude oil prices tumbled $3 after Saudi Arabia began offering more oil to Asian refiners.

  The euro fell against the dollar and yen as worries over Greece's debt crisis returned to center stage and investors scaled back expectations of the pace of future interest rate hikes in the euro zone.

  Fears the global economic recovery is stumbling grew after data showed China's export growth slowed in May. That followed a barrage of reports in recent weeks showing the U.S. economy has hit a soft patch, which has rattled investors.

  " We have had a slow erosion of economic numbers in the past quarter," said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. " The economic numbers aren't supporting this level of valuation."

  U.S. stocks opened sharply lower, while Treasury prices rose as investors turned to lower-risk government debt.

  The Dow Jones industrial average was down 115.99 points, or 0.96 percent, at 12,008.37. The Standard & Poor's 500 Index was down 11.71 points, or 0.91 percent, at 1,277.29. The Nasdaq Composite Index was down 20.06 points, or 0.75 percent, at 2,664.81.

  World stocks as measured by the MSCI world equity index fell 1 percent, on track for a decline of 1.5 percent this week. The index has lost more than 6 percent over the past six weeks and is only up 1.2 percent so far this year.

  The FTSEurofirst 300 stock index was down 1.1 percent at 1092.03 points. Earlier Japan's Nikkei closed up half a percent.

  U.S. crude oil fell $2.65 a barrel to $99.27. Brent crude was down $1.24 at $118.33 a barrel, having risen to $120.07 earlier, the highest since May 5.

  Top oil exporter Saudi Arabia is offering more crude to Asian refiners in July, industry sources with direct knowledge of negotiations said on Friday. It was the first evidence the kingdom is taking steps to raise supplies unilaterally after OPEC earlier this week failed to agree on an increase in the cartel's production targets.

  GREEK DEBT

  The euro fell 0.7 percent to $1.4404 and was down 0.9 percent to 115.46 yen, hurt by the lack of unity among euro zone officials on a resolution of Greece's debt troubles.

  The European Central Bank kept its 2012 inflation forecast unchanged on Thursday after leaving rates at 1.25 percent, suggesting the pace of euro zone interest rate hikes may be slower than previously thought.

  Investors received mixed messages about the progress of debt assistance to Greece. Germany stuck to its demand that private investors contribute to a second bailout even after renewed ECB opposition to any investor participation that might be deemed involuntary.

  " The image of European policymakers and the ECB standing toe to toe on this particular issue is something investors find deeply unsettling," said Michael Derks, chief strategist at FXPro.

  Core euro zone debt was generally a bit stronger, but there was more pressure on the periphery as the premium investors demand to hold Spanish and other lower-rated government bonds rather than benchmark German Bunds rose.

  Five-year credit default swaps on Greek government debt rose 25 basis points to 1,545 basis points, according to data monitor Markit. That means it costs 1.545 million euros to protect 10 million euros of exposure to Greek bonds.

  Benchmark U.S. 10-year Treasury notes were trading 10/32 higher in price to yield 2.96 percent, down from 3.00 percent late on Thursday. (Additional reporting by Edward Krudy and Chris Reese in New York, and Atul Prakash and Jeremy Gaunt in London editing by Dan Grebler)

NEW YORK, June 10 (Reuters) - U.S. stocks extended losses on Friday, with the Dow and S& P 500 indexes briefly down more than 1 percent, as weaker trade data from China, the scrapping of a large IPO and ongoing disputes about a second Greece bailout weighed on sentiment.

* Saudi newspaper says Saudi to pump 10 mln bpd in July

  * Lifting supply unilaterally after OPEC talks fall apart

  * Riyadh asserts authority but not seen flooding market

 

  (updates throughout)

  By Shaimaa Fayed

  DUBAI, June 10 (Reuters) - Saudi Arabia will raise output to 10 million barrels a day in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone to pump more outside official OPEC policy.

  Citing OPEC and industry officials, the newspaper said output would rise from 8.8 million bpd in May. There was no immediate independent verification of the story.

  The report suggests Riyadh is asserting its authority over fellow members of the Organization of the Petroleum Exporting Countries after it failed to convince the cartel to lift output at an acrimonious meeting in Vienna on Wednesday.

  " The Saudi intention is to show that they cannot be pushed around," said Middle East energy analyst Sam Ciszuk at IHS. " Either OPEC follows the Saudi lead or they will have problems."

  A proposal by Saudi and its Gulf Arab allies the UAE and Kuwait to lift OPEC production was blocked by seven producers including Iran, Venezuela and Algeria.

  The two sides blamed each other for the breakdown in talks. Saudi Oil Minister Ali ali-Naimi called those opposed to the deal obstinate. Iran's OPEC governor Mohammad Ali Khatibi responded by saying Riyadh had been overly-influenced by U.S.-led consumer country demands for cheaper fuel.

  " The hawks in OPEC called their bluff and now it is up to Riyadh to show that they were not bluffing -- that they will go ahead unilaterally if pushed," said Cizsuk.

  < ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

  OPEC says supply gap looms this year [ID:nLDE7591ES]

  Saudi supply increase cheapens OPEC crude [ID:nL3EHA18N]

  Saudi offers Asian refiners more oil [ID:nnL3E7HA01L] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

 

  NO FLOOD

  It appears unlikely though that Saudi is preparing to flood the market and produce more than is required to meet demand, potentially sending oil prices plummeting.

  New forecasts from OPEC headquarters released on Friday project demand for OPEC's oil increasing about 1.7 million bpd in the second half of the year to 30.7 million bpd.

  Saudi Arabia proposed to OPEC that it raise production targets to 30.3 million bpd.

  " Prices may moderate from where they would have been otherwise but it is not the intention of Saudi Arabia to use an oil weapon against Iran," said David Kirsch at consultancy PFC Energy in Washington.

  " They might be happy to see prices dip briefly but there is a broad consensus forming within OPEC that $100 is the minimally acceptable long-term price."

  Brent crude rose to a 5-week high of $120 a barrel after the OPEC talks broke down. Prices eased after Friday's Saudi news, dipping 45 cents to $119.12 a barrel.

  Saudi Arabia has not pumped 10 million bpd for at least a decade, according to Reuters data, production having peaked at 9.7 million bpd in July 2008 after prices hit a record $147 a barrel. It is the only oil producer inside or outside OPEC with any significant spare capacity.

  Asked in Vienna on Thursday whether Saudi would reach 10 million bpd Naimi said: " Just send the customers, don't worry about the volumes."

  Gulf delegates said Riyadh was planning to pump an average 9.5-9.7 million bpd in June.

  Saudi is already offering more crude to refiners in Asia, which, led by China, is driving a global rise in oil consumption. European refiners said they need no more for now.

* U.S. crude falls by more than $1 to below $100/barrel

  * Analysts say lack of OPEC leadership not price supportive

  (Adds quote para 10, spread, updates prices)

  By Zaida Espana

  LONDON, June 10 (Reuters) - Crude oil prices dropped on Friday as Saudi Arabia began offering more oil to Asian refiners, easing worries about supply following an inconclusive OPEC meeting.

  By 1400 GMT, U.S. crude futures fell by $2.65 to $99.28 a barrel, retreating from early gains and slipping below $100 a barrel.

  ICE Brent for July delivery was down $1.18 at $118.39 a barrel, having risen to a high of $120.07 earlier, the highest since May 5.

  Top oil exporter Saudi Arabia is offering more crude to Asian refiners in July, industry sources with direct knowledge of negotiations said on Friday, the first evidence the kingdom is taking steps to unilaterally raise supplies.

  The country will also boost production in July to 10 million barrels per day, al-Hayat newspaper said on Friday.

  The reports eased concerns that supply may dip following a meeting of the Organisation for Petroleum Exporting Countries, which failed to reach agreement on raised production quotas.

  " I would expect people to start to digest what happened during the meeting. It means OPEC has no longer a quota, no restraint on production and Saudi Arabia is doing that, offering more to Asian customers. This element today should lead to some pressure on prices," Christophe Barret from Credit Agricole CIB said.

  In a meeting on Wednesday, OPEC for the first time in about a decade failed to agree on output policy.

  " Today we're seeing a normalisation it's back to reality," Commerzbank analyst Carsten Fritsch said.

  Harry Tchilinguirian from BNP Paribas said OPEC's non-decision leaves countries with spare production capacity free to increase supply on a discretionary basis.

  " In this respect, all eyes are on Saudi Arabia as the largest holder of OPEC spare capacity. The Kingdom has demonstrated in the past that it can act unilaterally," Tchilinguirian said in a note.

  Merrill Lynch analysts piled into the debate, saying in a note that a breakdown in cohesion in OPEC cannot be a bullish signal for oil prices in the medium term.

  " OPEC's position could come back to hurt the cartel as the high cost of energy is a key risk to growth. Our energy as a share of GDP indicator suggests energy prices are reaching maximum affordability for the global economy," they said.

  " Our economists believe that the high oil prices washed out the U.S. fiscal stimulus passed in December, hampering the recovery in America. Similar negative effects can be observed in other oil-consuming economies."

  The spread between Brent and U.S. light crude, meanwhile, widened to a record $19.09 a barrel.

 

  CHINA DEMAND, POLITICAL TENSION

  Prices got support from strong demand by China, which registered a more than 20 percent year-on-year rise in May crude imports. The world's second-largest buyer imported more than 5 million bpd for a fifth consecutive month in May.

  " As we go through the second part of the year, there may be a constant upward revision on Chinese oil demand," said Tokyo-based Mitsubishi Corp's risk manager, Tony Nunan.

  Political tension in Libya, Syria and Yemen continued to support oil prices. NATO warplanes pummelled a town west of Libya's capital, state media said, soon after Western and Arab powers promised more than $1 billion to help rebels fighting to end Muammar Gaddafi's four-decade rule.

  In Syria, thousands fled into Turkey fearing a military assault, officials said, as the country braced for more violent protests against the rule of President Bashar al-Assad.

  The latest reports of a government crackdown intensified international concerns over Syria's handling of pro-democracy protests, inspired by uprisings across the Arab world. (Additional reporting by Simon Falush in London and Seng Li Peng in Singapore editing by Keiron Henderson and Jane Baird)