WASHINGTON (DTN) -- Erasing early losses triggered by concerns over slowing economic growth in Asia's industrial powerhouses, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled the last trading day of September and the third quarter mostly higher after reports emerged indicating the Chinese government ordered its top energy companies to secure fuel supplies this winter at any costs, underscoring the magnitude the energy crunch is having on major global economies.
More evidence of strained supply chains could be found in China's manufacturing data released Thursday morning, showing leading industrial indexes in the world's second largest economy fell into contraction for the first time since February 2020. China's industrial economy has been hammered this month by growing electricity shortages exacerbated by runaway commodity prices and depleted inventories. Faced with a growing issue this winter, China's government, led by Vice Premier Han Zheng, who supervises the nation's energy sector and industrial production, reportedly called on the nation's top energy companies to secure oil, gas and coal supplies at all costs, stating that "blackouts won't be tolerated."
A similar scenario has been playing out in the European Union, where natural gas prices hit all-time highs this week amid missed renewable targets and excess Russian demand that forced Gazprom to curb gas flows into the EU. Gazprom is the EU's leading gas exporter.
The natural gas crisis in Europe is set to intensify as winter heating season approaches, with supplies insufficient to keep up with current demand, let alone build stockpiles for what will be increased demand during the winter months.
The so called "energy crunch" in China and EU quickly spilled into oil markets, triggering a blowout rally earlier this week before prices cooled off amid concerns over stymied growth and runaway inflation.
Domestically, concerns over rising consumer prices have prompted a myriad of downward revisions to third-quarter growth forecasts, while the U.S. Federal Reserve signaled a fourth-quarter taper for its $120 billion a month in bond purchasing programs.
Fed Chairman Jerome Powell this week said a recent spell of higher inflation might last longer than central bank officials had anticipated, but he repeated his expectation that the price surge should eventually fade.
"The current inflation spike is really a consequence of supply constraints meeting very strong demand. And that is all associated with the reopening of the economy, which is a process that will have a beginning, middle and an end," Powell said.
The U.S. economy grew at annualized rate of 6.7% in the second quarter according to the Bureau of Economic Analysis report released Thursday morning, a 0.1% tick higher than their August estimate, while matching market expectations.
"Upward revisions to personal consumption expenditures (PCE), exports, and private inventory investment were partly offset by an upward revision to imports, which are a subtraction in the calculation of GDP," said BEA.
For the third quarter, Fed's Atlanta GDP Now model pegs a 3.2% growth rate as of Monday, Sept. 27, down from 3.7% on Sept. 21.
On the session, NYMEX November West Texas Intermediate futures added $0.20 to settle at $75.03 barrel (bbl), and ICE November Brent expired at $78.52 bbl after trading at $80.75 bbl, a 35-month high on the spot continuous chart, earlier this week. The December Brent contract settled at a $0.21 discount to the expiring contract in the backwardated market.
NYMEX October ULSD futures advanced 3.42 cents to expire at $2.3417 gallon, with the November contract settling with a 32-point discount to October delivery. October RBOB futures expired at $2.2536 gallon, with November delivery settling at 5.96 cents discount to the expired contract.
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