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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. There

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Speaker 2: is no mistaking the fact that volatility in oil prices

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Speaker 2: has been dominating market psychology and headline risk is high.

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Speaker 2: We are learning that the International Energy Agency has reportedly

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Speaker 2: proposed the largest release of oil reserves in its history. Obviously,

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Speaker 2: the aim would be to bring down prices that have

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Speaker 2: soared during the US Israeli action eny Iran. The Wall

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Speaker 2: Street Journal reporting the release would exceed one hundred and

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Speaker 2: eighty two million barrels now. Earlier in the day, the

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Speaker 2: oil market was buffeted by some confusion over whether the

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Speaker 2: US Navy had in fact escorted an oil tanker through

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Speaker 2: the Strait of horn Moves. Energy Secretary Chris Wright claimed

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Speaker 2: that was the case in a post on social media. However,

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Speaker 2: that post on x was deleted. Then, in a briefing

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Speaker 2: with reporters, White House Press Secretary Caroline Levitt said the

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Speaker 2: US did not escort any oil tanker through the strait.

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Speaker 2: For a closer look at some of this price action,

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Speaker 2: let's bring in Bloomberg strategist David Finnerty. David joins from

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Speaker 2: our studios in Singapore. Thank you for being here. Through

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Speaker 2: all of the turmoil that we have seen in markets

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Speaker 2: related to war in Iran, the dollar strength has been undeniable.

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Speaker 2: Not to be fair, the greenback has given back a

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Speaker 2: little bit over the last three days. How would you

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Speaker 2: describe these moves, David? Is it a have in trade

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Speaker 2: or is the price of oil been a more important factor?

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Speaker 3: I think, to be honest, it's sort of a bit

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Speaker 3: of both. I mean, you've got to even put in

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Speaker 3: there that the FED is, you know, market expectations for

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Speaker 3: the fed's being dulled back quite a lot as well,

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Speaker 3: so that's supportive US was pushing higher. So I think

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Speaker 3: it's a combination of factors, is really. And the other

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Speaker 3: thing is, you know, you over you know oil. Obviously

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Speaker 3: it's a big import oil importer of your zone. So

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Speaker 3: and that the OO has the big largest waiting the

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Speaker 3: dollar index or the Bloomberg Dolo index. So as UI goes,

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Speaker 3: Dollar tends to go the opposite. And obviously you always

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Speaker 3: been weighed down by the oil price of oils because

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Speaker 3: it's bad for the covenant account. So you know, I

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Speaker 3: think there's a mixture of factors in there. So all

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Speaker 3: of the above.

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Speaker 2: So if the longer term trend is for a stronger

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Speaker 2: dollar and we continue to see persistent weakness in selected

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Speaker 2: Asian currencies, do we need to consider the impact on

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Speaker 2: trade and how a weaker currency has the potential to

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Speaker 2: boost exports. Now I say that because today we learned

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Speaker 2: that South korea Is exports for the first ten days

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Speaker 2: of March jump by more than fifty five percent, And

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Speaker 2: I'm wondering whether buyers see the advantage of a weaker

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Speaker 2: currency and in that case would be compelled to bring

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Speaker 2: purchases forward.

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Speaker 3: I think to some degree. I think at the moment

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Speaker 3: it's a risk sentiment market and that's really what's dominating.

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Speaker 3: Ye know, these near term moves was a very headline

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Speaker 3: base are really what's super seeing everything else, if we're

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Speaker 3: being honest. So yes, you could go slightly, we could

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Speaker 3: currency will help you exports, but I think at the

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Speaker 3: moment then they go, but it's not good for inflation.

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Speaker 3: So I think overall, you're really looking at the market

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Speaker 3: at the moment's really just focused on what is its

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Speaker 3: inflation picture, how bad does it get, which really comes

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Speaker 3: down to how high and how long the oil and

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Speaker 3: gas go in the near term.

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Speaker 2: So are you prepared for a lot more in the

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Speaker 2: way of volatility across markets, whether we're talking currencies or rates.

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Speaker 3: Yeah, I think you have to be. I mean, at

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Speaker 3: the end of the day, the market's very headline dependent.

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Speaker 3: Is you look at yesterday you had the headline from

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Speaker 3: the energy sectory saying, oh, we've got we've escorted a

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Speaker 3: tanker to or moves and then they rejected that exit

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Speaker 3: hadn't happened. But the market's going to move off it

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Speaker 3: and then it has to retrace. So at the moment,

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Speaker 3: the reality is it's whatever the headlines are, and you

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Speaker 3: don't know what that headline's going to be. You do

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Speaker 3: not know when it's going to come out, You do

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Speaker 3: not know if it's could be reverse later on. So

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Speaker 3: it's volatility, I think is here to stay. The market's

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Speaker 3: certainly as trying to calm down because it's obviously got

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Speaker 3: a bit more information. It has the idea that Trump

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Speaker 3: has said, look, this won't be an extended war, which

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Speaker 3: is for lasting the market wants. But even within if

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Speaker 3: it's not extended war, you never quite know how this

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Speaker 3: is going to play out, and therefore there's always possibility

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Speaker 3: for a certainty or certainly near term, just these whipsaw

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Speaker 3: moves that you're seeing, so a lot of like you

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Speaker 3: look at FX, a lot of the countries are really

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Speaker 3: sort of range bound, but they're whipping around in that range,

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Speaker 3: so it becomes very tough to trade because literally it's

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Speaker 3: just going off headlines.

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Speaker 2: What is your sense of the degree of leverage in

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Speaker 2: markets right now? I mean, we had a lot of

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Speaker 2: turbulence in South Korea, and the indication that I was

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Speaker 2: given is that some of that was due to margin

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Speaker 2: calls and forced liquidation that essentially sent the cost me

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Speaker 2: one day down twelve percent? Is your sense that there

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Speaker 2: is still a fair amount of leverage throughout the system?

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Speaker 3: I think the leverage has certainly been reduced. I think

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Speaker 3: what happened is the or starting on the weekend. So

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Speaker 3: if you came in Monday morning the following Monday morning,

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Speaker 3: obviously the market moves straight away, so you were more

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Speaker 3: than like if you caught the wrong way, which a

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Speaker 3: lot of people were, whether it was short dollar or

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Speaker 3: long equities or blah blah, then obviously you were straight away.

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Speaker 3: Basically you were in the red, shall we say, to

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Speaker 3: some degree. I think, really, what's happening to all my

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Speaker 3: contacts is they've basically reduced of exposure or they've tried

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Speaker 3: to hedge to exposure. Having said that that, you know

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Speaker 3: they have maintained some losses. But at the moment, rather

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Speaker 3: than trying to add positions or increase exposure, given this

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Speaker 3: uncertainty of we're not sure how it's going to play out,

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Speaker 3: what direction, say the dollar or equities will go in

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Speaker 3: the near term, it's just like, look, let's reduce exposure.

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Speaker 3: So it's still exposure to be reduced or said or

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Speaker 3: hedge existing exposure.

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Speaker 2: You mentioned the euro a moment ago, and that has

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Speaker 2: certainly traded week against the greenback. Do you think we've

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Speaker 2: at around a buck sixteen put in a floor at

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Speaker 2: least temporarily.

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Speaker 3: I wouldn't say necessarily. Again, I think you're heavily or sorry,

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Speaker 3: the oil is heavily dependent on where the oil and

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Speaker 3: gas prices go. It is a big importal of both,

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Speaker 3: and obviously if they did start to surge higher again

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Speaker 3: then that could obviously put more pressure on them. So

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Speaker 3: I wouldn't say it's necessarily. I wonever i'd be looking for.

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Speaker 3: It's one fourteen sixty nine. That's like the recent logoing

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Speaker 3: back a few months, so it starts breaking below that,

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Speaker 3: then when fresh territory. What tends to happen is traders

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Speaker 3: will go as long as it's in a range, then

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Speaker 3: it's in a range, that's fine. When it starts breaking

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Speaker 3: out of that range, then you'd see some momentum trades

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Speaker 3: or people getting outtrades, so the moves can get a

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Speaker 3: bit more exascerinated. So I'd been certainly looking for a

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Speaker 3: blow one fifteen see how the market reacts to it.

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Speaker 3: But at the moment, I think it's it survived so

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Speaker 3: far should we say given that they are oil, the

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Speaker 3: region is all importans, But again we don't know how

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Speaker 3: this is all going to play out with oil and

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Speaker 3: straight orfore moves, so I wouldn't say we're out of

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Speaker 3: out of the water yet.

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Speaker 2: So when you get this level of volatility, would you

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Speaker 2: expect it forces central bankers to the sidelines. You don't

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Speaker 2: want to get actively involved in trying to intervene, whether

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Speaker 2: on the rate side because you're concerned about inflation, or

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Speaker 2: in a situation where a weaker currency may prompt you

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Speaker 2: to try to defend it. Is is it prudent for

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Speaker 2: a central banker just to kind of remain calm and

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Speaker 2: take to the sidelines at the moment, I.

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Speaker 3: Think a lot of central banks are doing that. We

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Speaker 3: have a lot of central banks decisions coming up next week.

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Speaker 3: We're obviously the FED being one of them, and I

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Speaker 3: think they know like that the problem is how high,

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Speaker 3: how long, and we don't have that information yet to

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Speaker 3: oil prices go. Having said that, some central banks, like

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Speaker 3: zer Bank of Indonesia so the Reserve Bank of India

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Speaker 3: and the Bank Indonesia have intervened in the councy markets

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Speaker 3: to help prop up their currencies. So certain currencies, if

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Speaker 3: you are net oil importers and you're vulnerable to this sentiment,

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Speaker 3: say in just certainly is then you know they have

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Speaker 3: intervened to prop up the countries to try to minimize

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Speaker 3: the decline. That does make sense. You don't want this

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Speaker 3: thing to escalate too quickly. But in terms of policy,

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Speaker 3: in terms of you know, do you hike or not hike?

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Speaker 3: I think initially the like that we need a bit

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Speaker 3: more information. You are saying. If you say Bank of

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Speaker 3: Japan does meet next week, the market's going that we're

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Speaker 3: not expecting to do anything next week, but April, when

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Speaker 3: we'll have a bit more information, So we say that

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Speaker 3: has become more of a live meeting now with markets go,

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Speaker 3: I look about fifty to sixty percent chance of a

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Speaker 3: rate height by then. Again, I think the key is

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Speaker 3: by that time, you know, we have three, four more

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Speaker 3: weeks or five more weeks of data, and then the

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Speaker 3: market we'll have a better idea of Again going back

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Speaker 3: to how high how long do these oil and gas

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Speaker 3: prices remain elevated?

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Speaker 2: So I'm wondering when you get this much market volatility,

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Speaker 2: whether it forces central banks to consider the possibility of

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Speaker 2: coordinating their responses.

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Speaker 3: It depends regarding what I think regarding monetary policy. That's

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Speaker 3: what you're alluding to. I don't think not yet. Again Again,

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Speaker 3: yes oil is gone, despite it's been only a week

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Speaker 3: or two weeks, you haven't seen markets collapse basically. Yes,

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Speaker 3: you've see moves, without question, you've seen increasing volatility, but

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Speaker 3: this isn't like you know, S and P, say, using

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Speaker 3: their equities down twenty percent or down ten percent. Even

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Speaker 3: so we're there is volatility, but not out of you know,

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Speaker 3: within decent realms. We say, given what's going on, I

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Speaker 3: think for them to corner activity, they'd be looking for

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Speaker 3: far more bigger moves that they would go, Okay, these

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Speaker 3: need to be sort of constrained to some degree if

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Speaker 3: they can. But at the moment I think they go

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Speaker 3: look with whethered, what what's happened so far? Relatively well,

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Speaker 3: or relatively said, given what has happened, you could expect

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Speaker 3: it to be a lot worse. So I think at

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Speaker 3: the moment they're quite happy to stay again relatively on

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Speaker 3: the sidelines. Said, because some banks have intervened to pop

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Speaker 3: up their currencies.

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Speaker 2: Does it surprise you that the Japanese yen hasn't been

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Speaker 2: more of a haven.

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Speaker 3: To some degree? I think you initially get the the

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Speaker 3: knee jerk moves higher, so like you saw a Swiss rink.

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Speaker 3: Initially on the Monday after the war started, move high over.

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Speaker 3: Yen was holding ground. In the weekend it was holding ground.

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Speaker 3: But now I think what's happened is that you're seeing

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Speaker 3: Japan is a big net oil and gas importer, so

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Speaker 3: it's been weighed down by its current accounts. So that

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Speaker 3: sentiment is there. The other problems that we always had

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Speaker 3: with Japan or the market out of Japan, that boj

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Speaker 3: maybe moving very slowly. Primaris attack each she's fiscal stimulus

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Speaker 3: weigh in on the company. So those haven't gone a degree.

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Speaker 3: So what's happened is that safe haven play. The market

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Speaker 3: sort of shrugged it off quickly because it said, well,

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Speaker 3: that's one side, but the opposite side is outweighing it,

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Speaker 3: and they said with the higher ordered prices. The market

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Speaker 3: quickly said, well, actually that's not good for Japan's economy.

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Speaker 3: So therefore the tug of war, shall we say, the

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Speaker 3: weaky yen side is winning now. I think what is

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Speaker 3: interesting is the market is well aware that were one

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Speaker 3: fifty eight. You know, market say we're reapproaching intervention territory

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Speaker 3: again or where the rate check was earlier this year,

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Speaker 3: so you know, how much higher does that have. I

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Speaker 3: think at the end of the day you could grind

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Speaker 3: up towards the one sixty level, maybe above one sixty

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Speaker 3: to one sixty one sixty two area. But I think

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Speaker 3: at some point then you know, the markets be where

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Speaker 3: it does the bo so it doesn't minister your finance intervene.

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Speaker 3: Of course, the catch is, if this is a dollar move,

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Speaker 3: you're just fighting a big dollar move. You're going I

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Speaker 3: going intervene where you going? You're going against the sea

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Speaker 3: of dollar buy how much impact will you have? So

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Speaker 3: I think that would also play into any intervention thoughts.

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Speaker 3: But at the end of the day, I think for

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Speaker 3: the moment the market's going look, there is room for

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Speaker 3: it to move higher. I don't think it's huge room,

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Speaker 3: but there is room for it to move higher. And

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Speaker 3: because it is part of the by dollar trade. So

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Speaker 3: as long as it remains that way, the risks of

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Speaker 3: skewity the upside. But as we said, a headline could

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Speaker 3: come out very quickly and going A tanker has been

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Speaker 3: escorted to the straight from moves and it's confirmed all

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Speaker 3: prices go down, dollar gets smacked, So you know it's

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Speaker 3: a chopping market to be trading in any market.

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Speaker 2: David will leave it there. Thank you so very much.

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Speaker 2: It's always a pleasure. Bloomberg strategist David Fennerdy joining from

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Speaker 2: our studios in Singapore here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm dek Krisner.

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Speaker 2: Let's get some more analysis on what we're seeing unfold

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Speaker 2: in the oil market. Von Dona Harri is the founder

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Speaker 2: of Vonda Insights. She spoke with Bloomberg TV host Heidi

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Speaker 2: Stroud Watts and April hom we.

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Speaker 4: Had seen oil prices start to creep up again, but

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Speaker 4: clearly there is some relief here, particularly if you take

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Speaker 4: a look at the non oil assets and those parts

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Speaker 4: of the markets as well. You sounded a little bit

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Speaker 4: doubtful when I spoke to you earlier. If they in

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Speaker 4: fact go through with this, how long live will the

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Speaker 4: impact be?

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Speaker 5: Good morning, Great question and great place to start, So

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Speaker 5: let's do the maths. The report so far is that

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Speaker 5: the IA is planning the biggest ever release, and the

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Speaker 5: number out there is so it would be somewhere north

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Speaker 5: of one hundred and eighty million barrels what we have

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Speaker 5: lost more than ten days of war. Very easy calculation,

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Speaker 5: about twenty million barrels per day that flows through the

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Speaker 5: strait of hormones. We are now past ten days of

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Speaker 5: the war. The market has already lost about two hundred

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Speaker 5: million barrels, give or take. If the IA countries released

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Speaker 5: that much of oil, and a separate question over what

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Speaker 5: period of time they'll be able to release all that,

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Speaker 5: that would simply make up what the market has already lost.

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Speaker 5: Then every single day after that that the war continues

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Speaker 5: and the strait remains closed. What do we do.

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Speaker 4: If you take a look at how how long this

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Speaker 4: conflict has gone for the impact across the Gulf States,

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Speaker 4: across the fliers it is, do you do modeling in

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Speaker 4: terms of how much worse it can get and what

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Speaker 4: alternatives there are to you know, being able to get

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Speaker 4: around using the straight of hor moves.

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Speaker 5: You know, this black saw swan event, if I can

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Speaker 5: call it, that has already gone past all modeling. You can't.

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Speaker 5: There's the obviously the warfare with the missiles and drones

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Speaker 5: and what's going on in the strait of Hormos right

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Speaker 5: so on the ground, and physical market disruptions that the

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Speaker 5: likes of which the markets have never seen before in

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Speaker 5: terms of the enormity twenty percent of the oil supply

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Speaker 5: simply getting cut off. But now this war has become

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Speaker 5: even more complex and layered the last few days. What

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Speaker 5: I'm seeing is it's become a psychological warfare. It's become

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Speaker 5: an information warfare, and just information warfare is wouldn't even

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Speaker 5: you know, completely describe it, because we are seeing you know,

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Speaker 5: as overnight we had the Energy Secretary in the US

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Speaker 5: putting out an expost that a tanker had been escorted

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Speaker 5: safely out of the strait of hormones and then retracting it,

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Speaker 5: and the US Press secretary, the White House Press Secretary

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Speaker 5: then saying that that was false information. So you know

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Speaker 5: that we are absolutely in uncharted territory here. And I

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Speaker 5: don't know what relief val was in the IA release.

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Speaker 5: Let's see what that does. Maybe some psychological impact, but

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Speaker 5: in the physical space, in the physical markets, it's absolutely

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Speaker 5: chaos and mayhem.

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Speaker 6: You talk about this psychological and information warfare. Say, though,

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Speaker 6: if this war comes to an end tomorrow, I wonder

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Speaker 6: what is your sense of the extent in which reduction

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Speaker 6: can be brought back quickly given the damage we've already

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Speaker 6: been seeing to producing infrastructure.

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Speaker 5: Yes, so I think we would also need to very

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Speaker 5: clearly define and agree on a definition of what an

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Speaker 5: end to the war means. Right, the market view has

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Speaker 5: been that President Trump declares victory, the war is over,

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Speaker 5: But we forget that there's two other sides in this war.

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Speaker 5: There's Israel, which said, I believe on the same day

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Speaker 5: that Trump said the war is going to be over

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Speaker 5: very soon, Prime Minister Nathania who said that Israel is

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Speaker 5: not finished yet. So we need to keep that in mind,

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Speaker 5: what plans and strategy does Tehran have. We don't know that,

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Speaker 5: So I think I would be very careful in calling in,

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Speaker 5: you know, describing what is an end to the war.

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Speaker 5: You would need absolute certainty for a period of time

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Speaker 5: in the markets and on the ground in the strait

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Speaker 5: of hormones that there's going to be no more threads

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Speaker 5: from drones and missiles and debris or even mines for

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Speaker 5: that matter, blade by anyone, for ships to actually start

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Speaker 5: going back and forth through that straight and for the

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Speaker 5: twenty million barrels per day to start flowing into the market. So,

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Speaker 5: you know, the end doesn't look as clear to my

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Speaker 5: mind as you know, one would hope it would.

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Speaker 6: And at the same time, is the war worsening the

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Speaker 6: problem that we've had of dark fleets? I mean, this

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Speaker 6: idea that the US is allowing Indian refiners to take

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Speaker 6: Russian energy and sanctioning them, I mean, how does this

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Speaker 6: shift the picture?

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Speaker 5: That's a drop in the bucket India could take potentially

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Speaker 5: I don't know, ten to twenty million barrels of Russian

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Speaker 5: oil that has been floating and stranded, if you will,

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Speaker 5: because of sanctions of the parties involved, or sanctions on

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Speaker 5: the vessels involved. Again, let's be very clear, the US

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Speaker 5: has not lifted even temporarily lifted sanctions on Russia. What

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Speaker 5: it has done is given a very limited waiver for

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Speaker 5: one month, India can buy oil that was already on

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Speaker 5: water as of the fifth of March. So a very

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Speaker 5: very small relief valve does almost nothing to address this

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Speaker 5: huge chokehold that we have in the Strait Now, and.

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Speaker 4: Where do you say the biggest vulnerabilities and economies across Asia?

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Speaker 5: Where do I start? So already we see the ripple

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Speaker 5: effect going through all the way into petrochemicals and every

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Speaker 5: single product around us that we consume that uses petrochemicals.

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Speaker 5: And you know, the every day I'm seeing at least

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Speaker 5: half a dozen two even a dozen companies declaring force

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Speaker 5: measure on products supply. These are petrochemical companies. So it

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Speaker 5: has already percolated all the way down to that part

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Speaker 5: of the oil supply chain that you know as is

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Speaker 5: the closest to consumers. And you know you earlier asked

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Speaker 5: me what when the war ends? I would say that

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Speaker 5: this supplied chain disruption has taken on such gigantic proportions

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Speaker 5: now that even a complete end to the war and

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Speaker 5: a complete return to novelcy. I fear would mean at

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Speaker 5: least months before we return to anything resembling normalcy in

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Speaker 5: oil supplies and refining, in petrochemicals and all the goods

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Speaker 5: that we consume on a daily basis.

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Speaker 6: So we are headed for a period of elevated oil

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Speaker 6: prices that could be extended protracted. I wonder what is

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Speaker 6: your sense of how high things can go one twenty

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Speaker 6: I mean, based on what you're saying, maybe that's not

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Speaker 6: even the lid well.

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Speaker 5: At this point, we are in this very curious and

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Speaker 5: unfortunate situation. I would say that the prices that we

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Speaker 5: are seeing on crude futures are simply completely disconnected from

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Speaker 5: ground realities. If you need to and if you have

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Speaker 5: to lift a physical barrel, which is where, which is

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Speaker 5: how the world functions, right, not on the basis of futures,

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Speaker 5: but the physical barrels, you are having to pay twenty

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Speaker 5: thirty forty dollars more than where the futures are trading.

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Speaker 5: So when you ask me where will prices go, it's

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Speaker 5: really hard to say. So which prices should we talk about?

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Speaker 5: But I would leave it at this that you know

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Speaker 5: how much longer the strait of horm moves remains close.

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Speaker 5: So the IA may provide some relief, very small temporary relief,

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Speaker 5: I would say, at the end of the day, the

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Speaker 5: strait of horm moves needs to reopen, or at least

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Speaker 5: in the physical market, physical oil prices will remain and

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Speaker 5: continue going up in triple digit territory. Just forget about

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Speaker 5: what you're seeing on your screens with regard to the futures.

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Speaker 2: That was von Donna Harri, founder of Vonda Inside, speaking

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Speaker 2: with Bloomberg TV host Heidi Stroud Watts and April Honn

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Speaker 2: bringing you their conversation here on the Daybreak Asia Podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg