Oil productivity has the Fed’s attention

There’s been plenty of chatter from various regional Fed presidents in the wake of the latest CPI data, which came in in line with expectations. The main question seems to be where the neutral rate will land with an economy that remains strong and perhaps faces inflationary pressures in the years ahead.

For now, things seem to be on track. As Fed Chairman Powell stated:

“We’re not declaring victory, obviously, but we feel like the story is very consistent with inflation continuing to come down on a bumpy path.”

After the report, expectations for a 25bps rate cut in December jumped from 60% to 82%.

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Jeff Schmid, President of the Kansas City Fed, spoke at the “Energy and the Economy: Meeting Rising Energy Demand” energy conference. He referenced productivity gains in the energy sector specifically (full speech text here):

“A recent news article that featured Kansas City Fed research highlighted that the energy sector has had the fastest productivity growth of any industry over the past decade. We have been following these developments closely and have contributed to the research and discussion around the astounding growth of the U.S. energy sector. The numbers are clear, especially with oil, where the United States has increased production 5% so far this decade with 27% fewer rigs and 17% fewer workers.”

+Oil Was Written Off. Now It’s the Most Productive US Industry – Bloomberg

~Doug (My Linkedin, let’s connect)

What’s in this issue:

• Energy Market Recap
• Headlines

Energy Markets🛢️Oil prices bumped slightly higher yesterday, but were again basically unchanged. The market continues to consolidate as we await today’s delayed EIA statistics, the next China headline, or the next move out of Iran.​ 🔥Natural gas prices were up over 2.5% as we continue to move deeper into a very late fall. While weather news will dominate moves in the short term, in the longer run an oversupplied market and concerns over LNG exports will continue to gain attention.​ European gas markets are beginning to feel the support of winter demand, as shown in upward-trending TTF prices. ​Source: TradingEconomics​

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Doctor CopperEnergy prices are waiting for the next headline to drop, but Doctor Copper is already showing his hand.​ Citi released a note cutting its price target for the metal amid ongoing concerns of China’s stimulus plan. Additionally, the market is still long, leaving open the possibility of further unwinding if prices continue south.​ “Citi points to a disconnect between current market sentiment in manufacturing and copper market positioning, suggesting that further reduction in long positions could occur as traders adjust expectations in light of an uncertain manufacturing recovery in 2025.”​ +China’s Copper Market Needs More Stimulus, Says Top Importer – Bloomberg