CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange continued lower on the first day of November following a sell-off in October, with oil futures under pressure from climbing global and domestic production and slowing world economic growth.
On Wednesday, Reuters reported crude production by the Organization of the Petroleum Exporting Countries increased 390,000 barrels per day (bpd) to 33.31 million bpd in October, the highest output rate since December 2016. The jump in output is more than offsetting lost production from Angola, Venezuela and Iran, with Iranian oil exports set to drop further as U.S. sanctions take effect Monday.
The Energy Information Administration on Wednesday reported U.S. crude production at 11.2 million bpd during the week-ended Oct. 26, and the sixth consecutive weekly increase in commercial crude supply, up 3.2 million barrel (bbl) to a 4-1/2 month high. Days of forward supply increased to 26.1 days, the highest supply buffer since mid-May.
As supply builds, world oil demand is expected to drop from a 100.2 million bpd record high in the current fourth quarter to 98.9 million bpd in the first quarter 2019, according to the International Energy Agency. Seasonally, world oil consumption peaks in the fourth quarter and is weakest in the first quarter.
In addition to the seasonal decline in global oil demand, oil futures have been under pressure on slowing world economic growth. The U.S.-China trade dispute is one factor weighing on the global outlook, with the dispute between the world's two largest economies having a negative effect on China.
Data out this week shows no growth in China's manufacturing sector for the past two months, holding just above contraction. That contrasts with an ongoing expansion in manufacturing in the United States and a strong labor market.
Thursday morning, the U.S. purchasing managers index for manufacturing edged up from 55.6 in September to 55.7 in mid-October that was slightly below expectations, although showed ongoing strength in production and employment. The Institute of Supply Management released their report on manufacturing that showed ongoing growth, but a slowdown driven by several factors, including higher costs and supply chain constraints. The Manufacturing ISM fell 2.1% to 57.7% in October that was well below expectations for a reading of 59.1%.
"Comments from the panel reflect continued expanding business strength. Demand remains moderately strong," said ISM.
Thursday morning's data follows a strong reading on U.S. employment released Wednesday by ADP payroll services. In their national employment report, ADP showed private businesses added 227,000 jobs in October, beating economists' expectations for an increase of 189,000.
Employment data released Wednesday also showed strong wage growth. The Department of Labor releases their nonfarm employment report for October Friday morning, with expectations 190,000 jobs were created last month and that the national unemployment rate held at a 3.7% 49-year low.
In early trading, Nymex December West Texas Intermediate futures were down slightly near $65.20 bbl after trading at a fresh 2-1/2 month low on the spot continuous chart at $64.65 overnight. ICE January Brent futures pared a decline to a $74.08 2-1/2 month spot low to trade near $74.70 bbl, down $0.35.
Nymex December ULSD futures were down 0.35 cents near $2.2491 gallon after trading at a $2.2255 five-week low on the spot continuous chart overnight. Nymex December RBOB futures were down 0.5 cents near $1.7455 gallon, trading near a fresh eight-month spot low of $1.7352 gallon.
Brian L. Milne can be reached at firstname.lastname@example.org
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