Speaker 1: This is Bloomberg surveillance. I see economic data proving the
Speaker 1: United States. I think that's becoming increasingly obvious, but I
Speaker 1: still think we're gonna be growing into two somewhere. I
Speaker 1: would recommend that investors, state defensively postured and cautious policymakers,
Speaker 1: financial markets, and the economic and financial media looked to
Speaker 1: the FED to solve all the problems, and they're not
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Speaker 1: the year. They have been more than kind. So is
Speaker 1: uh the bid two commodities. Bruno Stanza allis with your
Speaker 1: Aisier Group Bremer's Eurisier Group. UM. He has worked with
Speaker 1: various companies, including more Capital Management, and he just simply
Speaker 1: looks at the energy business and the Nash natural resources business. Bruno,
Speaker 1: wonderful to have you here. Is it for real? Goldman
Speaker 1: says it's not there. It's all over the media to
Speaker 1: business media. Uh. Jeff Curry and the team at Goldman
Speaker 1: saying maybe not. You push against that idea. Yeah, And
Speaker 1: you know what you have to start by asking yourself
Speaker 1: define what's real? Right? You know that that's the big question.
Speaker 1: What are your expectations for prices? UM? Highly respect that
Speaker 1: team over there. I've been I've been reading their stuff
Speaker 1: for for almost twenty years now. Um I am. I
Speaker 1: am theorizing that oil has seen the lows. You know,
Speaker 1: a lot of people were calling for a twenty dollar
Speaker 1: price deck because that was what was needed to get
Speaker 1: US production offline. Um, I don't think so. I don't
Speaker 1: think we need to go that low to see the
Speaker 1: supply response that's needed to rebalance the market. So we're
Speaker 1: looking for a slow, steady, gradual upward price movement from
Speaker 1: here to around forty barrel for the balance of and
Speaker 1: then slowly gravitating towards an average price of fifty dollars
Speaker 1: a barrel in And at that point you're gonna start
Speaker 1: to see the US producers come back into the market
Speaker 1: with new supply supply that will take care of the
Speaker 1: decline rates and incrementally add So I think the worst
Speaker 1: is behind us. I think you're seeing a knee jerk
Speaker 1: reaction to the market's expectation. The worst is behind us.
Speaker 1: Will slowly gravitate into a range, volatility will dry up,
Speaker 1: and we'll start to slowly ratchet up from there. But
Speaker 1: I don't think you're going to see a twenty dollar
Speaker 1: price deck if we get to that level. Um, you're
Speaker 1: talking ballants We're not going to have people who need
Speaker 1: cash pumping more oil just because the price is higher
Speaker 1: and send us back into trouble. Yes, and that's a
Speaker 1: great point, I think at the end of the end
Speaker 1: of the day. And this is where where OPEC can't
Speaker 1: get too cute. Right, Um, if you have a price
Speaker 1: deck that balances the market, you're incrementally drawing down on
Speaker 1: stocks anywhere between sort of forty five to fifty dollars.
Speaker 1: The real risk is OPAC loses control again because now
Speaker 1: you have US based oil and gas producers that have
Speaker 1: all reconfigured their business models to be profitable at fifty dollars.
Speaker 1: So you'll start to see increases in global production at
Speaker 1: that price level. And look, this is what this phenomenon
Speaker 1: is all about, right, This was a supply driven price
Speaker 1: route based upon something secular. Something changed. We can access
Speaker 1: more oil faster, cheaper, and more efficiently. That's not going away.
Speaker 1: Why did we put a floor in here? Yes, the
Speaker 1: Saudis and the Russians agreed to freeze production. Nobody believed
Speaker 1: that they're actually doing it. They didn't set any targets
Speaker 1: or any way to prove what's happening. So why did
Speaker 1: this work. It worked because I think that you know,
Speaker 1: low prices cure low prices generally, particularly in cyclical commodities.
Speaker 1: Um At the end of the day, there is a
Speaker 1: certain amounts or certain number of US based producers that
Speaker 1: cannot operate under sort of you know, sub thirty five
Speaker 1: dollar price environment. So the market was always expecting year
Speaker 1: on your declines in production. The rate of those, of
Speaker 1: the steepness of that decline curve was not as high
Speaker 1: as people thought. We don't have as much production coming
Speaker 1: off as anticipated, but it's coming off. Let's not forget.
Speaker 1: You know, year on year US based oil production is
Speaker 1: off probably around three barrels a day at this point,
Speaker 1: and it will continue to come off unless prices go higher.
Speaker 1: So we'll slowly balance the market as production comes off
Speaker 1: in the States. As we do that, prices will go
Speaker 1: higher only to be met by new production increases. And
Speaker 1: that's what this is all about. Right at the end
Speaker 1: of the day, we're no longer in this supercycle. We
Speaker 1: are in a process where crude oil will reset into ranges,
Speaker 1: and that's what we're looking. I'll go that you don't
Speaker 1: have the maybe you don't have the China catalyst to
Speaker 1: get us out to stupid pricing again. But did you
Speaker 1: see the catharsist to clear markets, I mean the heart
Speaker 1: of your theory versus the good work of Jeff Curry
Speaker 1: and others who are more suspect about a bid being
Speaker 1: set in the heart of the matter as you've got
Speaker 1: to clear that supplied glot. Did we do that? Or
Speaker 1: is Cushing still up to its eyeballs and oil? Well,
Speaker 1: we are in the process of clearing that supply gut.
Speaker 1: And given the expectations idea, we're you know, we're betting
Speaker 1: on where we are June, where we are September, and
Speaker 1: that what gives you the confidence to believe that Cushing
Speaker 1: is cleared. Well, it's not necessarily just about Cushing, and
Speaker 1: you know, I mean Cushing is definitely it's the hub
Speaker 1: that prices W T I, which is the benchmark, and
Speaker 1: we all know that. But firstly, you know, define defined
Speaker 1: Cushing being full in essence. That's that's very hard to
Speaker 1: do because throughout my career doing this, you know, we've
Speaker 1: had multiple instances where Cushing was quote unquote full and
Speaker 1: it never quite gets full. So the reality is that's
Speaker 1: a very difficult thing to determine. And at the end
Speaker 1: of the day. You have to remember when when when
Speaker 1: a certain UH storage basin gets full, you have other
Speaker 1: areas that you start to fill out. So you know,
Speaker 1: I think the basis has to be looking at year
Speaker 1: on your production declines. We are in the process of
Speaker 1: clearing up that glut via production declines. And what I
Speaker 1: mean by that is U S producers are not given
Speaker 1: a price signal to develop new reserves profitably in order
Speaker 1: to negate production declines. So we needed to take price
Speaker 1: down to that level, which I think we have because
Speaker 1: you're seeing you're on your price production declines, so we're
Speaker 1: slowly cleaning the market up. I think as that happens,
Speaker 1: you'll see it in the numbers weekly and then again monthly.
Speaker 1: The market is always forward looking, and that's what it's
Speaker 1: pricing in. Now we reached the price where we're seeing
Speaker 1: a significant amount of production to clients. That will continue,
Speaker 1: stocks will begin to draw down, will raise to a
Speaker 1: price level where producers can develop raw acreage at a
Speaker 1: higher price. That price is probably around fifty bucks. Every
Speaker 1: e MP company in their quarterly UH statements has been
Speaker 1: saying we have learned will learn how to operate profitably.
Speaker 1: A fifty dollars. That's the signal right from the horse's mouth. Well,
Speaker 1: you got a lot of e MP companies who may
Speaker 1: not be around in a month or two. What what's
Speaker 1: that looking like now as we get into the bank
Speaker 1: reset season. Yeah, No, that's the million dollar question. And
Speaker 1: I think the saudis in particular, we're we're as gloomy
Speaker 1: as it sounds, we're looking for more bankruptcies. The reality is,
Speaker 1: when you start to really look at the detail behind
Speaker 1: the bankruptcies that have been announced in the last eighteen
Speaker 1: months to two years, there have been in North America
Speaker 1: roughly forty or forty three bankruptcies. The issue is, the
Speaker 1: companies that have been declaring bankruptcies are not volumetrically significant
Speaker 1: enough to cause this sort of cataclysmic drop in US production. Clearly,
Speaker 1: we haven't seen it. They tend to be the names,
Speaker 1: quite frankly, you would have expected to declare bankruptcy, the
Speaker 1: small to medium sized names that were highly leveled out
Speaker 1: of the gate, and they're just not big enough. The
Speaker 1: real and this is one of the reasons why production
Speaker 1: has been so resilience in this in the States is
Speaker 1: the larger, volumetrically significant producers have had no trouble accessing
Speaker 1: the cheapest form of capital, and that's accessing the equity markets.
Speaker 1: You know, take a look at the secondaries that we've
Speaker 1: seen last year and into this year, big numbers generally
Speaker 1: successful secondary offerings. Devon Energy is a notable one, most
Speaker 1: recently raised one point three billion dollars. And the interesting
Speaker 1: thing is when you look at what they all say
Speaker 1: they're gonna do with that capital. Well, primarily they're gonna
Speaker 1: pay down debt that preserve their credit rating, because again
Speaker 1: a lot of this is orchestrated behind the scenes a
Speaker 1: better credit rating agencies. You want to reintain your credit rating,
Speaker 1: you want to maintain your current cross getting paid down
Speaker 1: your debt and start to get discipline. So they're all
Speaker 1: paying down debt, but almost all of them are saying
Speaker 1: that they're also going to use a part of that
Speaker 1: revenue to develop reserves because at the end of the day,
Speaker 1: they're in the business of producing. Yeah, that's the DNA. Well,
Speaker 1: let's come back one talk about net gas, which has
Speaker 1: been a life of its own as well. Mike Urgent
Speaker 1: message Leslie Patton reporting for Bloomberg News, shake Check drops,
Speaker 1: shake Check fell in early trading after Tom Keene did
Speaker 1: not buy the smoke Scheck double bar. It's our fault,
Speaker 1: galories nine. Do about the four cents? Okay, we could
Speaker 1: do something about that today. I think we should do
Speaker 1: that road trip today Madison Square Park. Help help them
Speaker 1: out there, don eight percent. Seriously, they they've they've lightened
Speaker 1: up a little bit this morning as they go in
Speaker 1: search of growth. That's your Shakesheck report for those of
Speaker 1: you worldwide Shake Shacks, the official lunch counter for Bloomberg surveillance,
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Speaker 1: world and national headlines. Mike, Tom, thank you very much.
Speaker 1: Poles are opening today for presidential primaries. Democrats vote today
Speaker 1: in Michigan and Mississippi. Republicans vote today in Michigan, Mississippi, Idaho,
Speaker 1: and Hawaii, and appeal hearing will take place today from
Speaker 1: the Utah branch of Planned Parenthood. They want to reverse
Speaker 1: the judge's decision that allowed the state's governor to cut
Speaker 1: off funding to the organization. South Korea says it will
Speaker 1: sanction forty individuals and thirty organizations abroad, mostly in North Korea,
Speaker 1: as part of its punitive measures on the North for
Speaker 1: its recent nuclear test and rocket launch. Today's announcement comes
Speaker 1: a day after North Korea warned of preemptive nuclear strikes
Speaker 1: in response to the start of Seoul Washington military drills.
Speaker 1: The North views those drills as an invasion rehearsal. Global
Speaker 1: News twenty four hours a day, powered by our twenty
Speaker 1: four hundred journalists more than a hundred fifty news bureaus
Speaker 1: from around the world. I'm michaela bar Time and MACA.
Speaker 1: Thanks so much. Coming up, Bruno Stanza, We're gonna talk
Speaker 1: about net gas. We haven't done enough on that. It
Speaker 1: is truly imploding NetCast. We'll do that next. Bloomberg's the
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