DTN Oil

WASHINGTON (DTN) -- Following an overnight pullback triggered by weaker-than-expected industrial data for China, Japan and South Korea, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved mixed in early trade Thursday, with the international crude benchmark retreating from a three-year high settlement reached earlier this week as traders reassess the impact of global supply chain disruptions and the recent surge in commodity prices on growth prospects in Asia's leading economies.

Overnight data from China, Japan and South Korea showed manufacturing output in Asia's leading economies were hammered at the end of the third quarter by disruptions in global supply chains. China's official manufacturing purchasing managers' index fell into contraction this month at 49.6, down from 50.1 reading in August. This marked the first reading below 50 since the start of the COVID-19 pandemic in February 2020, data from the China's National Bureau of Statistics showed. The subindex of industrial production registered a 1.4-point contraction to 49.5, indicating slower output.

China's growing electricity shortages have halted production at numerous factories this month, including many that supply parts to Apple and Tesla, while businesses and households in industrial provinces of the northeast reportedly forced to operate by candlelight.

Japan's industrial output fell for the second straight month in August, according to government data released early Thursday, as COVID-19 outbreaks disrupted supply chains for carmakers already facing headwinds from a protracted chip shortage. Japan's factory production contracted 3.2% in August from the previous month, falling far below expectations for a 0.5% decline.

According to Statistics Korea released Wednesday evening, industrial production, investments, and consumption all fell last month for the first time since the lifting of COVID-91 restrictions.

Domestically, commercial crude oil inventories increased for the first time in over two months last week, according to data from the U.S. Energy Information Administration, gaining 4.6 million barrels (bbl) versus an expected 2.5 million bbl drawdown. Domestic producers raised output by 500,000 barrels per day (bpd) last week to 11.1 million bpd as operators in the offshore U.S. Gulf of Mexico continue to recover from Hurricane Ida-caused shut-ins. Distillate stocks increased 384,000 bbl to 129.7 million bbl last week, while demand for distillate fuels, often seen as a proxy for economic activity, slipped below 4 million bpd.

Market participants continue to monitor developments around the upcoming policy meeting among Organization of the Petroleum Exporting Countries and Russia-led partners scheduled for Monday. Wire services indicate OPEC+ ministers may consider raising production in November above its 400,000 bpd agreed to target to meet rising fuel demand from Europe and Asia. OPEC+ reached consensus in July to increase production 400,000 bpd each month until December, gradually phasing out the remaining 5.8 million bpd in cuts initiated in April 2020 in response to the pandemic.

In early trading, NYMEX November West Texas Intermediate futures slid $0.57 to trade near $74.23 bbl, and ICE November Brent continued its retreat from Tuesday's $80.75 bbl 35-month high on the spot continuous chart to trade near $78.13, down $0.51 ahead of expiration this afternoon. The December Brent contract is trading at a $0.56 discount to the expiring contract in the backwardated market. NYMEX October ULSD futures advanced 2 cents to trade at $2.3279 gallon ahead of expiration, with the November contract trading with a 28-cent discount to October delivery. October RBOB futures declined 0.83 cents to $2.2210 gallon, with November delivery trading at 7 cents discount to the October contract ahead of Thursday afternoon's expiration.

Liubov Georges can be reached at liubov.georges@dtn.com