WEBVTT - Kilduff on Oil Markets (Audio)

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<v Speaker 1>You're listening to taking stock with pim Box at Kathleen

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<v Speaker 1>Hayes on Bloomberg Radio. Oil prices posting a third weekly

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<v Speaker 1>gain as the potential for a production freeze deal among

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<v Speaker 1>major producers outweighing concerns about ample inventor is here to

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<v Speaker 1>tell us more? John Kilda, founding partner of Again Capital.

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<v Speaker 1>All right, John, great to have you with us. Are

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<v Speaker 1>we going to see oil prices continue to move higher?

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<v Speaker 1>I think in the short run we will go a

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<v Speaker 1>bit higher. Pim that the market got caught short in

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<v Speaker 1>the face of some comments by the new Saudi oil minister.

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<v Speaker 1>Uh and the short covering is is underway with with

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<v Speaker 1>abandon right now, so I think we still have some

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<v Speaker 1>more to go before we can head back lower again.

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<v Speaker 1>All right, what is going to cause the lower prices

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<v Speaker 1>after this short covering? Well, again, you know that the

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<v Speaker 1>market got to a record short position. So whenever the

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<v Speaker 1>book gets floated to one side, I like to say

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<v Speaker 1>it has to revert um. But I think as long

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<v Speaker 1>as put the price rally fails at fifty or fifty two,

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<v Speaker 1>we'll go back down. The reason we're going to go

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<v Speaker 1>back down is because for all the talk of a freeze,

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<v Speaker 1>and all the talk of cooperation among OPEC, Russia and

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<v Speaker 1>maybe some other countries, there's just keeps seeing more and

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<v Speaker 1>more oil coming to the market. The Saudis are at

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<v Speaker 1>a record export level of crudal and refined products. The

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<v Speaker 1>Chinese are continuing to ramp up their export of refined products,

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<v Speaker 1>brush at and all time high. Northern Iraq oil productions

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<v Speaker 1>came back online for the first time in months chest today.

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<v Speaker 1>Olibians are starting to get their oil after the market

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<v Speaker 1>again as well as Nigerians can get their act together.

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<v Speaker 1>It's just another wave of oil for this market so

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<v Speaker 1>that it has nowhere to go. But then and John

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<v Speaker 1>countries such as Venezuela, they're looking to increase or to

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<v Speaker 1>export more oil because that's a hard currency earner. Absolutely,

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<v Speaker 1>Pim and you know, and they in Venezuela that you

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<v Speaker 1>just mentioned, they certainly are the basket case among the

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<v Speaker 1>producers right now. With their economy teetering on imploding completely.

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<v Speaker 1>Their their oil production actually is somewhat challenged, so that

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<v Speaker 1>is something of a supportive feature. And I know you've

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<v Speaker 1>probably been talking about this all day, but the weakness

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<v Speaker 1>and the dollar has had a big effect on on

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<v Speaker 1>dollar denominated oil prices. As well as that dollar falls,

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<v Speaker 1>it props up oil prices, so that too is a

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<v Speaker 1>factor right now. What role is Iran playing in the

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<v Speaker 1>oil industry? Well interesting, I was at the last meeting,

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<v Speaker 1>at the last goal around of this freeze uh nonsense.

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<v Speaker 1>I was convincent deal would not come together. I thought

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<v Speaker 1>maybe this time that there was a chance for a

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<v Speaker 1>deal because the Iranians are pretty much back to their

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<v Speaker 1>pre sanctioned output levels in terms of crude oil production.

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<v Speaker 1>But they have just said that they probably won't attend

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<v Speaker 1>the meeting in Algeria next month where they're hoping to

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<v Speaker 1>get this deal cobbled together. And also to their recent

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<v Speaker 1>allowance of Russia to use an air base within Iran

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<v Speaker 1>to strike Syria is really a stick on the eye

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<v Speaker 1>of the facialities once again. So there's no coming together

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<v Speaker 1>between those two name uh fat players in OPEX, and

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<v Speaker 1>without that there will be no deal. John, you mentioned

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<v Speaker 1>Nigeria production and I wonder if you could tell us

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<v Speaker 1>a little bit about why it is at a twenty

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<v Speaker 1>seven year low and what's going to happen next. So

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<v Speaker 1>where the oil is in Nigeria is in the southern

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<v Speaker 1>part of the country. You're on the coastlines called the

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<v Speaker 1>Nigeria Delta, and from time to time the indigenous folks

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<v Speaker 1>down there raise up rise up in protests and rebel

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<v Speaker 1>and bomb and attack the oil infrastructure because they don't

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<v Speaker 1>get their their fair share of the pie as they

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<v Speaker 1>as they see it. The new government that came in

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<v Speaker 1>their cut payments to the various groups there, and what

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<v Speaker 1>you think would happened happens, and so there's been attacks

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<v Speaker 1>on the infrastructure and they've been a pretty dedicated bunch

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<v Speaker 1>there that has helped not oil output offline, but that

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<v Speaker 1>the government has reversed course, has begun making payments, their

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<v Speaker 1>serious negotiations under way so that oil output could rebound

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<v Speaker 1>as quickly as it went offline. I like the point

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<v Speaker 1>now that this is not the Fokohoram and other um

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<v Speaker 1>sectarian sort of upset that you have in the northern

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<v Speaker 1>part of the country. This is strictly all about petro

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<v Speaker 1>dollars john at a price of around forty eight dollars

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<v Speaker 1>a barrel for West Texas and fifty dollars a barrel

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<v Speaker 1>for Brent crude, at what point do US producers start

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<v Speaker 1>pumping more oil? Well, they've done an incredible job. Now

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<v Speaker 1>over the past, you're driving their costs down. There are

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<v Speaker 1>a number of areas now where they're profitable at thirty

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<v Speaker 1>five dollars a barrel. Uh. You might have noticed today

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<v Speaker 1>that the rig count Bakers use rick Cant was up again,

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<v Speaker 1>I think for the fourth straight week. It's fact. I

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<v Speaker 1>think they added ten right, they added ten riggs, ten

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<v Speaker 1>more riggs. It's up about almost now off it's low

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<v Speaker 1>from March, so they've been racing riggs back into service.

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<v Speaker 1>And earlier this week it was partly due to an adjustment,

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<v Speaker 1>but the e i A told us that US production

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<v Speaker 1>has jumped the most it has since May, undred and

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<v Speaker 1>fifty thousand barrels a day, which is not insignificant. So

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<v Speaker 1>they're on the comeback trail really as we speak. Just

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<v Speaker 1>getting over four dollars of barrel seems to invite it

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<v Speaker 1>some hopeful analysis among the sector to get back in,

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<v Speaker 1>get back in the ground, and get drilling again. To

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<v Speaker 1>give you some numbers for it, uh, the number of

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<v Speaker 1>rigs drilling for oil in the United States has climbed

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<v Speaker 1>for eight consecutive weeks. It rose about four rigs for

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<v Speaker 1>the for the week for the first time since February.

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<v Speaker 1>This all according to Baker Hughes Uh. John, explain what

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<v Speaker 1>happens with refiners because they're switching over from gasoline production

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<v Speaker 1>to h heating oil. Correct, that's correct. And they're also

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<v Speaker 1>switching over from a summer grade gasoline to winter grade gasoline,

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<v Speaker 1>which is easier to make. And then we had an

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<v Speaker 1>abundance of that coming out of last winter, which helps

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<v Speaker 1>get the pump prices really low come February when they

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<v Speaker 1>had to switch out. So it's gonna happen now, Tammy.

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<v Speaker 1>You're going to see the refiners cut their runs, their

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<v Speaker 1>their their util station rate, and of course that's going

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<v Speaker 1>to cause crude oil be less in demand back up

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<v Speaker 1>in the system. And this is why over the course

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<v Speaker 1>of the next couple of months you could see a

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<v Speaker 1>real breakdown again, just as we saw last year, as

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<v Speaker 1>the glut just enlarges and gets bigger and bigger and

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<v Speaker 1>uh and and really the global market gets swamp again.

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<v Speaker 1>I want to thank you very much John Kildoff, he

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<v Speaker 1>is the founding partner of Again Capital, giving us his

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<v Speaker 1>view on the oil markets with oil posting a third

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<v Speaker 1>weekly gained. I want to thank you all for listening

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<v Speaker 1>to taking Stock. My thanks to our engineer Reggie Basil,

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<v Speaker 1>our producer Marx and Escalche. I'm pim Fox and this

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<v Speaker 1>is Bloomberg.