DTN Oil

WASHINGTON (DTN) -- In early trade Friday, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were mostly lower, with the crude contracts declining after European manufacturing data recorded a sharp deceleration of growth in September, falling by the largest margin since the lockdown of April 2020, and global equity markets extended their September decline into beginning of the fourth quarter with focus on rattled supply chains and rising consumer prices.

Overnight economic data out of eurozone confirmed investor fears over a sharp slowdown in global manufacturing output hammered by supply constraints and softening demand from industrialized economies. The final reading on eurozone manufacturing purchasing manager's index for September fell to the lowest reading since February at 58.6 -- a notable step down from 61.4 seen in August. Germany and France, the bloc's two largest economies, led the declines, with industrial indexes in both countries falling to eight-month lows.

Commenting on the data released Friday morning, Chris Williamson, Chief Business Economist at IHS said, "Supply issues continue to wreak havoc across large swathes of European manufacturing, with delays and shortages being reported at rates not witnessed in almost a quarter of a century and showing no signs of any imminent improvement."

More evidence of strained supply chains could be found in China's manufacturing data released earlier this week, showing leading industrial indexes in the world's second largest economy fell into contraction for the first time since the beginning of the pandemic in February 2020. Coupled with global supply constraints, widespread power outages in China's industrial provinces prompted Beijing to call on its top energy companies to secure fuel supply this winter at any costs.

Later Friday morning, investors will turn their attention to domestic manufacturing data, with Institute of Supply Management publishing its September report at 10 a.m. ET. ISM manufacturing index is expected to edge lower to 59.8 from August showing of 59.9. The risks are skewed to the downside however, with Chicago's PMI's plunging to a seven-month low in September at 64.7.

Federal Reserve Atlanta GDP Now model estimates the gross economic growth averaged 3.2% in the third quarter, down sharply from 6.7% in the second quarter, according to the Bureau of Economic Analysis.

On Wall Street, futures contracts tied to the Dow Jones Industrial Average are indicating a 175-point opening bell decline at the start of October after the biggest monthly percentage drop for the 30-stock average since September of last year. The U.S. dollar extended its sideways overnight price action to trade around 94.100, down 0.15% against a basket of foreign currencies.

In early trade, NYMEX November West Texas Intermediate futures fell below $75 per barrel (bbl) to trade near $74.50 bbl, and ICE December Brent contract fell to $77.90 bbl. NYMEX November ULSD futures edged nearly 1 cent lower to near $2.3290 gallon, with front-month RBOB futures gaining 0.45 cents to 2.1985 gallon.

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