WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange resumed losses Friday afternoon, with all petroleum contracts finishing the last trading day of September and the third quarter with sharp losses propelled by growing fears surging inflation and aggressive rate hikes from central banks along with the protracted conflict in Eastern Ukraine will tip the global economy into recession, wiping out a chunk of post-pandemic gains in global demand growth.
West Texas Intermediate and Brent crude posted their first quarterly losses since 2020, with both benchmarks erasing more than 20% of their value over the past three months. WTI suffered a steeper decline due, in part, to a rallying U.S. dollar index, which has an inverse relation to the U.S. crude benchmark. The dollar rallied against foreign currencies on the back of aggressive rate hikes from the Federal Reserve and accelerated inflation in the Eurozone.
Inflation surged in Europe in recent weeks, with European consumer prices climbing in September to the first ever double-digit reading of 10%, up from 8.6% at the start of the third quarter. Energy and food once again drove inflation, though an underlying measure that excludes the two volatile categories also topped estimates to reach an all-time high of 4.8%.
Domestically, inflation failed to moderate in the third quarter, albeit the rise in consumer prices is more modest compared to European countries. In September, headline inflation in the United States eased to 8.3% from a year earlier, still unacceptably high, but core consumer prices powered higher despite the retreat in the gasoline index.
Such data have proven critical in driving momentum toward large rate hikes from the Federal Reserve that have raised its benchmark interest rate by 0.75% for the third consecutive month in September. Stronger-than-expected gains in the labor market do not help that sentiment, strengthening the case for the central bank to continue aggressive rate hikes until unemployment begins to tick higher, relieving pressure on consumer prices. The odds for the Federal Reserve to manage a soft landing for the world's largest economy have been scaled back in recent weeks.
China's economy continues to struggle under the heavy weight of Beijing's "Zero-COVID" policy, with localized lockdowns and containment measures wiping out a chunk of Asian demand growth.
Manufacturing data out of China, released Thursday overnight, showed factory activity contracted at a sharper pace in September than in the prior two months. China's Caixin manufacturing index fell 1.4 points from late August to 48.1, down for the second consecutive month and well below the 50-point threshold that separates growth from contraction.
"Weakening global demand for Chinese goods weighed heavily on the manufacturing sector, with new export orders shrinking at the fastest pace since May," read comments with the data release.
With central banks around the world rushing to restrict the flow of credit and raise interest rates, the demand for Chinese manufacturing goods is unlikely to improve markedly in the fourth quarter.
At settlement, November West Texas Intermediate futures fell $1.74 to $79.49 bbl. ICE November Brent futures expired at $87.96 bbl, down $0.53 on the session, with the December contract expanding its discount to November delivery to $2.82 bbl.
NYMEX October RBOB futures fell 3.5 cents to expire at $2.4726 gallon, with the November contract settling the session at $2.3698 gallon. The October ULSD contract expired 4.56 cents lower at $3.3690 gallon, widening its premium to the November contract to 14.74 cents.
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