WEBVTT - Bloomberg Surveillance TV: March 11th, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:36.680 Terminal and the Bloomberg Business app. So we get to 0:00:36.680 --> 0:00:38.320 the ve on Wall Street this morning. This is what 0:00:38.360 --> 0:00:41.279 it sounds like. Stephen Arthur Federated writing, we're maintaining our 0:00:41.320 --> 0:00:45.159 outlook for more modest but volatile, positive single digit returns 0:00:45.159 --> 0:00:48.320 in US Starstream twenty twenty seven. Steve joins us now 0:00:48.320 --> 0:00:50.239 for more. Steve, Welcome to the program. I read the 0:00:50.280 --> 0:00:53.120 recent note let's work through it. Do you still believe 0:00:53.120 --> 0:00:55.640 this is just another brick in a so called climbable 0:00:55.680 --> 0:00:56.680 wall of worry? 0:00:58.480 --> 0:01:00.840 Well, jarthan there's a fine line between a wall of 0:01:00.880 --> 0:01:04.200 worry and a brick wall. So for the moment, we 0:01:04.319 --> 0:01:07.039 think it's still another brick but as you guys have 0:01:07.160 --> 0:01:09.520 been highlighting, it really is a matter of. 0:01:09.560 --> 0:01:10.720 How long this goes on. 0:01:12.240 --> 0:01:15.520 The market is trying to look through the valley here, 0:01:16.760 --> 0:01:18.759 you know, to the other side of the valley, and 0:01:19.680 --> 0:01:23.160 you can see that in the shape of the Eel curve. 0:01:23.160 --> 0:01:25.600 You can see it in the shape of the vall 0:01:25.840 --> 0:01:30.240 curve of the futures market, you know, oil energy futures. 0:01:30.280 --> 0:01:32.960 I think the spot oil is about ten dollars higher 0:01:33.040 --> 0:01:37.160 right now than the future's price of oil at bround 0:01:37.200 --> 0:01:42.560 sixty seven. Same way, you know with with the volatility index. 0:01:42.640 --> 0:01:45.400 The you know, the vall out on the outside of 0:01:45.480 --> 0:01:48.040 the curve is down in the low twenties. The thing is, 0:01:48.080 --> 0:01:50.440 it's still higher than it was at the beginning of 0:01:50.520 --> 0:01:52.720 the year, both volatility and oil. 0:01:53.360 --> 0:01:54.880 Even if you go out. 0:01:54.840 --> 0:01:58.080 More, you know further, which is what the market stocks 0:01:58.120 --> 0:01:58.960 are pricing off of. 0:01:59.040 --> 0:02:00.600 I mean, we've talked about this on your show. 0:02:00.600 --> 0:02:04.880 That oil market is a spot market that has to 0:02:05.360 --> 0:02:09.360 trade commodities on a daily basis. This stock market is 0:02:09.400 --> 0:02:11.960 looking at the future price a while, and you know 0:02:12.000 --> 0:02:15.160 that price is lower. But the longer this goes on, 0:02:15.280 --> 0:02:18.680 the future and the presence start to combine. So I 0:02:18.720 --> 0:02:21.440 think You're right to be focusing on how long this lasts, 0:02:22.120 --> 0:02:25.359 and the market is trying to look through this. It's 0:02:25.480 --> 0:02:28.120 fortunate that we cut our target price on the S 0:02:28.160 --> 0:02:31.359 and P prior to this whole thing happening. 0:02:31.400 --> 0:02:33.840 That was just pure luck, I suppose. 0:02:33.960 --> 0:02:38.320 But the reason we did that was we did anticipate 0:02:38.360 --> 0:02:41.119 to be some kind of a correction, and we're kind 0:02:41.120 --> 0:02:41.960 of setting. 0:02:41.600 --> 0:02:44.000 The levels at which we would re. 0:02:44.040 --> 0:02:47.160 Enter the market with new cash because I think you know, 0:02:47.200 --> 0:02:49.400 if your target on the S and P is lower, 0:02:49.440 --> 0:02:52.200 which it is for us, you know, you need a 0:02:52.200 --> 0:02:55.240 little more upside before you're going to step in, especially 0:02:55.240 --> 0:02:58.880 to a situation like this. So for now, we're holding firm. 0:02:59.200 --> 0:03:02.600 We're watching events just like you are and waiting to 0:03:02.639 --> 0:03:06.360 see even when the end comes nearer. 0:03:06.680 --> 0:03:07.680 One thing is sure. 0:03:07.919 --> 0:03:08.440 It's going to. 0:03:08.600 --> 0:03:10.640 End, you know, that's not a question. 0:03:10.720 --> 0:03:13.200 The question is how long it's either going to end 0:03:13.200 --> 0:03:17.120 with a regime change or it's going to end, you know, 0:03:17.240 --> 0:03:20.239 with some sort of ceasefire and a kind of hobbled 0:03:20.400 --> 0:03:23.239 Iranian regime. But one way or the other, this will end. 0:03:23.680 --> 0:03:27.240 Steve, you said that the one challenge to your relatively 0:03:27.280 --> 0:03:29.640 constructive view for the year ahead of single digit returns 0:03:29.680 --> 0:03:33.840 until twenty twenty seven was sustained levels of ninety dollars 0:03:33.960 --> 0:03:37.920 or above of crude. I'm just wondering, what does sustained mean? 0:03:38.280 --> 0:03:40.640 How long does it have to remain above ninety dollars 0:03:40.680 --> 0:03:42.800 for you to materially change your view. 0:03:44.800 --> 0:03:47.240 Yeah, I don't know that we have a precise number 0:03:47.280 --> 0:03:50.600 of days, Lisa, but you know, somewhere probably in the 0:03:50.600 --> 0:03:53.120 two to three month range. You know, if you had 0:03:53.240 --> 0:03:56.640 ninety dollars that long, you're going to have two impacts 0:03:56.680 --> 0:03:59.000 that are going to have to cause us and I 0:03:59.040 --> 0:04:01.960 think others to up their economic outlook in terms of 0:04:02.000 --> 0:04:04.520 the growth rate. We're still at three percent growth this year, 0:04:04.880 --> 0:04:08.720 and we've got earnings very very strong this year and next. 0:04:09.360 --> 0:04:11.720 But you know, if you go three months or so, 0:04:11.920 --> 0:04:16.960 you're going to really start to impact economic activity, particularly 0:04:16.960 --> 0:04:20.760 on the low end of the consumption bandwagon, if you will, 0:04:20.800 --> 0:04:23.320 which is kind of where we were expecting a recovery 0:04:23.360 --> 0:04:25.839 this year because of all the things going on with 0:04:25.920 --> 0:04:27.680 the one big beautiful. 0:04:27.240 --> 0:04:29.200 Bill and the lawyer goes on. 0:04:29.520 --> 0:04:33.600 The higher the risk that this one time price impulse 0:04:34.680 --> 0:04:39.000 gets kind of normalized and fed into a broader inflation 0:04:39.080 --> 0:04:42.600 in the economy, which then takes off the table the 0:04:43.040 --> 0:04:46.320 eight cuts that we have in our forecast. As you know, 0:04:46.360 --> 0:04:49.040 we've got two or three cuts out there over the 0:04:49.080 --> 0:04:51.640 next twelve months, which we think we're still on track for. 0:04:51.800 --> 0:04:56.320 But if oil stays up this, you know, for two 0:04:56.440 --> 0:04:59.640 or three months, maybe the people started asking for raises 0:04:59.640 --> 0:05:03.440 against that price, and then it bleeds into a broader inflation. 0:05:03.880 --> 0:05:05.279 Hi, Stave, I just want to deal with the word 0:05:05.279 --> 0:05:08.800 defensive gets thrown around a lot. Being defensive means different 0:05:08.800 --> 0:05:12.159 things at different times, and it's highly dependent on the shock. 0:05:12.240 --> 0:05:15.680 There are times when tech has defensive quality staples, the 0:05:15.800 --> 0:05:18.320 usual one, but this foe is different. What is defensive 0:05:18.680 --> 0:05:21.239 in a moment like this one, we think. 0:05:21.120 --> 0:05:24.040 Defensive is some of these hard asset companies. We were 0:05:24.080 --> 0:05:26.320 talking about this when I was on the show last time, 0:05:26.560 --> 0:05:30.800 you know, in more in the value space, and certain 0:05:30.880 --> 0:05:34.680 like defense companies are defensive right now because they're hard 0:05:34.720 --> 0:05:38.159 asset companies that also are seeing good, strong top line 0:05:38.200 --> 0:05:43.120 growth for obvious reasons. Energy companies are big stocks in 0:05:43.200 --> 0:05:49.560 the value indices form of companies, strong dividends, broad you know, 0:05:49.680 --> 0:05:52.800 broadly diversified, and well defended. 0:05:54.040 --> 0:05:55.720 You know, product modes if you will. 0:05:55.839 --> 0:05:59.400 So it's it's these companies that are very broadly diversified, 0:06:00.279 --> 0:06:06.000 as reliant on you know, where the market is valued, 0:06:06.160 --> 0:06:09.520 have a good dividend yield, and in a single digit 0:06:09.600 --> 0:06:14.320 return environment, dividendials of four percent three percent start to 0:06:14.360 --> 0:06:18.200 look more attractive. If the market's going up twenty percent, 0:06:18.279 --> 0:06:20.360 no one cares about the dividendials. So I think those 0:06:20.400 --> 0:06:23.400 are the kind of defensive areas that we like here. 0:06:23.480 --> 0:06:27.680 We like them coming into this. They've actually underperformed, some 0:06:27.839 --> 0:06:31.119 of them, not all. I mean the financials are also 0:06:31.160 --> 0:06:33.479 in the value and the seas they've underperformed obviously, But 0:06:34.600 --> 0:06:37.560 you know, we like those areas here, especially coming out 0:06:37.600 --> 0:06:40.960 of this. Provide it we don't have to take another 0:06:41.040 --> 0:06:42.800 haircut to our economic growth. 0:06:43.520 --> 0:06:46.960 Stay with US multile index Savanance coming up off to this, 0:06:56.279 --> 0:06:58.440 let's tend to the federal serve. The Republican Senates a 0:06:58.480 --> 0:07:02.320 Tom Tillis prising FENCH nominee Kevin Walsh following their meeting yesterday, 0:07:02.480 --> 0:07:04.840 but not wavering on his promise to block any FED 0:07:04.880 --> 0:07:08.640 nominations until the criminal pro into the current chair Jpow ends. 0:07:08.760 --> 0:07:11.320 The former Sam Lewis FED president Jim Ballad joins us 0:07:11.320 --> 0:07:13.800 now for more, Jim, welcome to the program. Set the stage. 0:07:13.840 --> 0:07:17.000 How difficult a moment is this for an incoming FED share. 0:07:17.920 --> 0:07:21.320 Yeah, so you've got to get through the nomination process first. 0:07:21.400 --> 0:07:25.800 And as I as I understand it anyway, I don't 0:07:25.800 --> 0:07:29.880 think anything's going to happen. So nobody is going to 0:07:30.080 --> 0:07:33.480 be on the FED board anytime soon. The way this 0:07:33.720 --> 0:07:36.360 is going, the administration will have to come to some 0:07:36.520 --> 0:07:39.040 kind of deal. They don't seem to be talking about that. 0:07:39.280 --> 0:07:40.920 So I think it's stalled for now. 0:07:41.120 --> 0:07:43.119 It's the second time we've had to deal with this, Jim. 0:07:43.440 --> 0:07:46.040 Before it was largely in the President's hands, and for 0:07:46.080 --> 0:07:49.720 whatever reason, Biden stalled. He stilled, he stored, and waited 0:07:49.760 --> 0:07:53.720 a long long time to reselect, renominate chair power for 0:07:53.720 --> 0:07:56.320 a second term. And some people, even people who were 0:07:56.360 --> 0:07:58.520 on the committe at the time. So that's what stopped 0:07:58.520 --> 0:08:01.520 this FEDER reserve from hiking quick enough to respond to 0:08:01.640 --> 0:08:05.720 the energy crisis and the inflation pandemic shock coming out 0:08:05.720 --> 0:08:07.720 of the pandemic. Now, Jim, I just wondered this time 0:08:07.760 --> 0:08:10.360 around how critical this moment actually is with a frenchile 0:08:10.440 --> 0:08:14.360 labor market and pressure once again on inflation, coming from energy. 0:08:15.400 --> 0:08:19.360 Well, it's always critical, always lots of lots of interesting 0:08:19.400 --> 0:08:23.040 things going on. I would say about this shock, it's 0:08:23.040 --> 0:08:25.320 not like the seventies. I mean, this is of course, 0:08:25.360 --> 0:08:28.560 this is going to bring up you know, hearkening back 0:08:28.600 --> 0:08:30.920 to the seventies. But the US is a leading oil 0:08:31.000 --> 0:08:35.200 producer today and weren't at that time. So I think 0:08:35.240 --> 0:08:40.000 the recession threat from this shock is probably smaller than 0:08:40.000 --> 0:08:42.960 it would have otherwise been because you've got the supply 0:08:43.120 --> 0:08:47.120 side kind of offsetting demand. 0:08:46.760 --> 0:08:48.000 Destruction that could occur. 0:08:48.160 --> 0:08:51.800 So so I think and then on the inflation side, well, 0:08:51.960 --> 0:08:56.560 you know, the FED looks through or press shocks anyway, 0:08:56.559 --> 0:08:59.560 they look at core inflation. So there's only a small 0:08:59.600 --> 0:09:03.920 effect on core inflation from this. So it's really whether 0:09:04.480 --> 0:09:10.480 inflation expectations would start to rise because markets would start 0:09:10.520 --> 0:09:12.839 to think that the FED was going to accommodate this shock, 0:09:12.880 --> 0:09:15.480 which is what happened in the seventies. I don't think 0:09:15.480 --> 0:09:17.520 that committees in much of a mood to do that. 0:09:17.800 --> 0:09:21.200 So I think it's a different situation. Even though this 0:09:21.240 --> 0:09:24.280 is a really big shock, it's a different situation than 0:09:24.320 --> 0:09:26.600 what we saw earlier in the post war era. 0:09:26.920 --> 0:09:29.040 Jim what gives you confidence that there's enough momentum in 0:09:29.080 --> 0:09:32.240 the underlying economy to make this not an issue of 0:09:32.240 --> 0:09:36.120 demand destruction, not an issue of the consumer increasingly crimped. 0:09:36.920 --> 0:09:40.839 Yeah, I just think, you know, the shock would hit 0:09:40.920 --> 0:09:43.960 the US economy and that would be you know, gas 0:09:44.000 --> 0:09:46.600 prices are certainly something that we all pay every day, 0:09:47.520 --> 0:09:50.560 so that has acted like a tax in the past. 0:09:50.679 --> 0:09:54.080 But you've also got a supply side, you know, being 0:09:54.120 --> 0:09:57.959 the world's leading oil producer, which is offsetting some of that. 0:09:58.480 --> 0:10:01.080 I would also say that we've you know, we've seen 0:10:01.160 --> 0:10:06.880 actually higher oil prices in the past if I recall 0:10:06.960 --> 0:10:10.280 collect correctly in two thousand and eight, and in real terms, 0:10:10.280 --> 0:10:13.120 that would be over two hundred dollars a barrel. So 0:10:13.160 --> 0:10:18.240 that's a very different scenario. Markets are right to focus on, well, 0:10:18.280 --> 0:10:20.880 how long would this conflict continue to go on? 0:10:22.480 --> 0:10:24.400 You know, US could withdraw at. 0:10:24.320 --> 0:10:27.400 Any point saying it's declare victory and withdrawal. 0:10:27.480 --> 0:10:29.280 So we'll we'll see what happens here. 0:10:29.440 --> 0:10:32.800 We see Jim expectations over at the ECB as well 0:10:32.800 --> 0:10:35.360 as the Bank of England for a potential rate hike. 0:10:35.520 --> 0:10:38.240 Increasingly priced and in response to higher oil prices. 0:10:38.559 --> 0:10:39.199 Do you think that. 0:10:39.520 --> 0:10:42.040 People will start thinking about the same here in the US. 0:10:42.960 --> 0:10:45.000 I don't know if they go that far. I think 0:10:45.040 --> 0:10:47.560 more would have to happen before they go that far. 0:10:47.640 --> 0:10:51.480 I think the more likely scenarios that they just stay 0:10:51.520 --> 0:10:56.120 on hold longer than they otherwise would have in order 0:10:56.200 --> 0:10:58.920 to send a signal that they want to keep inflation 0:10:59.000 --> 0:11:02.760 under control. But again, it's the inflation expectations probably that 0:11:02.800 --> 0:11:03.840 matter more. 0:11:05.520 --> 0:11:08.240 Than the oil price movements directly. 0:11:08.720 --> 0:11:12.280 Well, we already see airlines across Europe and Asia increasing fares. 0:11:12.320 --> 0:11:15.880 They're raising the fuel surcharges given what's going on in 0:11:15.880 --> 0:11:19.359 the war. Also in America, we are farmed to table society. 0:11:19.440 --> 0:11:22.920 All of our food comes because of petrol and gasoline 0:11:22.960 --> 0:11:26.240 on trucks. Isn't that going to be a problem for 0:11:26.679 --> 0:11:29.679 this Federal Reserve? Not just the fact that gasoline prices 0:11:29.760 --> 0:11:32.719 this morning are closer to four dollars a gallon than three. 0:11:33.040 --> 0:11:34.520 Yeah, I mean, it's going to be a problem for 0:11:34.600 --> 0:11:40.120 headline inflation, but you know, the committee looks at core inflation. 0:11:40.280 --> 0:11:43.000 So the whole point of that is to say that 0:11:43.320 --> 0:11:48.280 they're not going to react to movements in food and 0:11:48.400 --> 0:11:53.400 energy prices that can be pretty transitory and have historically 0:11:53.440 --> 0:11:56.240 been pretty transitory, so that what they want is the 0:11:56.520 --> 0:11:57.960 underlying trend in inflation. 0:11:58.960 --> 0:12:01.160 And you can look at. 0:12:00.760 --> 0:12:04.040 Core PC inflation, which the Committee likes, or Dallas fed 0:12:04.080 --> 0:12:06.800 trim med inflation, which throws out some of the high 0:12:06.840 --> 0:12:10.800 and low price changes that occur in the price change distribution. 0:12:10.960 --> 0:12:15.800 So sure, yeah, people are really paying these things. 0:12:15.840 --> 0:12:20.160 It really does matter, Yes, but when you're trying to 0:12:20.200 --> 0:12:23.440 make policy for the medium term, you've better look through 0:12:23.480 --> 0:12:23.839 some of it. 0:12:24.640 --> 0:12:28.120 Stay with us more Bloomberg surveillance Coming up after this. 0:12:37.400 --> 0:12:41.439 The IEA considering a record release of emergency or reserves 0:12:41.440 --> 0:12:44.200 to easearch and crude costs. This coming as German and 0:12:44.320 --> 0:12:46.760 Japanese officials announced plans to release part of their own 0:12:46.840 --> 0:12:50.480 national reserves. Samantha the cohead of Global Commodities research at 0:12:50.480 --> 0:12:53.200 Golment Sechs writing, because the straight up Homers flows data 0:12:53.360 --> 0:12:57.120 unnoisy and the broader situation remains fluid, We've not changed 0:12:57.160 --> 0:13:00.040 our oil price forecast, but estimate the large upset I 0:13:00.280 --> 0:13:03.839 risk in longer disruption scenarios. Sam joined us for more. Sam, 0:13:03.880 --> 0:13:07.520 good morning, what's your assessment of where we are right now? 0:13:07.559 --> 0:13:10.120 Never mind the pr effort coming from officials at the moment, 0:13:10.440 --> 0:13:12.920 what's this disruption currently look like. 0:13:13.200 --> 0:13:16.360 Yeah, so we're losing about fifteen point four million barres 0:13:16.400 --> 0:13:20.720 a day of supply from the region. If this release 0:13:21.240 --> 0:13:23.960 goes through, and it looks like it will, it can 0:13:24.120 --> 0:13:27.800 offset that by about let's say two and a half. Well, 0:13:28.080 --> 0:13:31.080 the fastest ever release that we've had from the group 0:13:31.400 --> 0:13:32.840 was at a pace of two and a half, So 0:13:33.160 --> 0:13:36.079 you can talk about a three to four hundred million 0:13:36.120 --> 0:13:38.319 barre release, but it's not going to be all at 0:13:38.360 --> 0:13:41.040 once matching the pace one to one to the loss. 0:13:41.240 --> 0:13:42.880 So on that we are. 0:13:42.840 --> 0:13:45.559 Still likely to be losing over ten million bears a 0:13:45.640 --> 0:13:47.800 day of oil from the market. 0:13:47.880 --> 0:13:50.560 So when they say four hundred, someone like you, here's 0:13:51.080 --> 0:13:53.000 to two point five per day. 0:13:53.120 --> 0:13:55.840 Yeah, because at least that's what we observed in the past. 0:13:55.840 --> 0:13:58.800 What is the mac space that they've released, So you 0:13:58.840 --> 0:14:01.320 can't really count on anything bigger than that. 0:14:01.440 --> 0:14:04.240 It might happen. We have to wait and see. 0:14:04.520 --> 0:14:07.840 But based on what we've seen on net, we're still 0:14:07.840 --> 0:14:09.679 going to be losing a lot of oil day by day, 0:14:09.840 --> 0:14:12.640 and it matters because what the market is looking at 0:14:12.760 --> 0:14:14.920 is Okay, here's the size of the shock. This can 0:14:14.960 --> 0:14:17.000 reduce the size of the shock a little bit, but 0:14:17.200 --> 0:14:20.200 still it's a very large shock. So if it continues 0:14:20.480 --> 0:14:23.600 for long enough, that's when prices go back to that 0:14:23.760 --> 0:14:27.280 kind of panic mode of demand destruction. You know, when 0:14:27.280 --> 0:14:29.880 we cross one hundred dollars a barrow. To me, that's 0:14:29.960 --> 0:14:33.400 the signal being sent. It's like, oh, we can't manage 0:14:33.440 --> 0:14:36.280 this fast enough, so we need to destroy demand a 0:14:36.320 --> 0:14:37.280 little bit faster. 0:14:37.680 --> 0:14:40.200 This release can slow this down a little bit. I 0:14:40.240 --> 0:14:41.320 think Lisa was just. 0:14:41.280 --> 0:14:43.840 Mentioning this that, you know, it keeps the curve a 0:14:43.880 --> 0:14:45.920 little bit more more managed. 0:14:46.360 --> 0:14:48.200 But when we saw the headline come out of four 0:14:48.280 --> 0:14:50.960 hundred million barrels a day, actually we saw prices take 0:14:51.080 --> 0:14:53.920 back up a little bit. Is the market panicking that 0:14:54.240 --> 0:14:55.880 policy makers think this is going. 0:14:55.720 --> 0:14:58.440 To last a lot longer. I don't think it's a 0:14:58.480 --> 0:15:00.760 panic yet. I don't call it that. 0:15:01.080 --> 0:15:03.680 But remember yesterday we also had a little bit of 0:15:03.720 --> 0:15:07.160 conflicting headlines as to whether the US head escorted a 0:15:07.200 --> 0:15:07.920 thinker or not. 0:15:08.360 --> 0:15:10.280 So I think the rebounding. 0:15:09.760 --> 0:15:12.240 Prices that we saw late yesterday might. 0:15:12.040 --> 0:15:13.800 Have been associated with that. 0:15:13.920 --> 0:15:17.320 Oh so, the flow through hormos is not really improving, 0:15:17.480 --> 0:15:19.560 And to be fair, the data that we have seen 0:15:19.640 --> 0:15:20.760 so far, even. 0:15:20.600 --> 0:15:23.120 Though it is noisy and it is revised. 0:15:22.680 --> 0:15:25.400 All the time, so far, it does suggest that flows 0:15:25.440 --> 0:15:27.840 through hormones have not really improved. 0:15:28.000 --> 0:15:30.560 When it comes to some of that misinformation that we're seeing, 0:15:30.640 --> 0:15:33.920 How does it make it that much harder for traders 0:15:34.000 --> 0:15:35.400 for the market to position? 0:15:36.880 --> 0:15:38.760 It creates a lot of volatility. 0:15:38.960 --> 0:15:42.200 The past two days are a perfect illustration of that, 0:15:42.440 --> 0:15:47.040 because again I think the uncertainty on duration makes such 0:15:47.080 --> 0:15:50.320 a big difference. If this is a one month's shock, 0:15:50.560 --> 0:15:53.600 and we know ahead of time it's a one month shock, okay, 0:15:53.680 --> 0:15:56.400 we get the release, we upset most if not all 0:15:56.440 --> 0:16:00.800 of it. India can access some of the sanctions barrels 0:16:00.840 --> 0:16:02.040 from Russia as well. 0:16:02.200 --> 0:16:04.400 We're actually okay by the end of the year. 0:16:04.520 --> 0:16:07.880 There's no panic, there's no demand destruction needed. But if 0:16:07.880 --> 0:16:10.800 it's a one month shop, but we don't know that yet, 0:16:11.280 --> 0:16:14.000 the market has to price in the risk that. 0:16:14.040 --> 0:16:16.400 It might be two months, it might be three months. 0:16:16.560 --> 0:16:19.440 So that sense of urgency to destroy a little bit 0:16:19.440 --> 0:16:22.560 more of the man now to avoid inventor is going 0:16:22.560 --> 0:16:26.000 to critically low levels shows up a little more. So 0:16:26.160 --> 0:16:28.680 this is what keeps us from above one hundred now 0:16:28.720 --> 0:16:30.960 below one hundred. Maybe this is going to be overseeing 0:16:31.080 --> 0:16:34.160 more confidence. Oh but the flows are still low and 0:16:34.200 --> 0:16:36.800 then you're hit with this release from the IA. Okay, 0:16:36.800 --> 0:16:39.120 so maybe the piece of drawdown in stocks is not 0:16:39.200 --> 0:16:41.880 quite as fast. So to your point, it keeps the 0:16:41.920 --> 0:16:45.920 market guessing. What are we trying to manage here? So 0:16:46.760 --> 0:16:48.640 the two aspects of it that we're going to be 0:16:48.720 --> 0:16:52.360 tracking day by day Number one the volumes, what is 0:16:52.360 --> 0:16:55.600 the disruption every day? And what can be offset by 0:16:55.640 --> 0:16:56.400 these releases? 0:16:56.440 --> 0:16:59.440 That's number one? But number two, how long is this 0:16:59.560 --> 0:17:00.440 going to? Asked? 0:17:00.640 --> 0:17:05.640 Where is that confidence that this can be contained within 0:17:05.680 --> 0:17:08.760 a month versus say two or three months, in which 0:17:08.800 --> 0:17:12.400 case the market needs to hedge against much bigger disruptions. 0:17:12.440 --> 0:17:15.000 I'm struck by the dissonance between the financialization of some 0:17:15.040 --> 0:17:18.639 of these futures contracts and the physical world, which takes time, 0:17:19.000 --> 0:17:22.480 is messy, needs to be restarted, has time lag. I'm 0:17:22.480 --> 0:17:24.480 just wondering, based on what we've heard so far about 0:17:24.520 --> 0:17:29.160 closures or stoppage, is how long you think it will 0:17:29.200 --> 0:17:32.600 take to restart some of the production that has already 0:17:32.600 --> 0:17:33.560 been taken offline. 0:17:33.800 --> 0:17:36.159 Yeah, you have a little over six million bears a 0:17:36.240 --> 0:17:40.560 day already down from production oil of crude oil in 0:17:40.600 --> 0:17:41.080 the region. 0:17:41.720 --> 0:17:43.120 We estimate that. 0:17:43.000 --> 0:17:45.240 If it were to restart today, it would take about 0:17:45.240 --> 0:17:47.280 four weeks to get back to normal. 0:17:47.400 --> 0:17:48.600 Four weeks. Four weeks. 0:17:48.840 --> 0:17:51.720 So, I guess, how are people saying if this resolves 0:17:51.760 --> 0:17:55.600 in the next week, there won't be a prolonged increase 0:17:55.880 --> 0:17:57.760 risk premium on oil prices. 0:17:57.800 --> 0:17:58.160 I guess. 0:17:58.320 --> 0:18:00.320 Can we just say that from here on now we 0:18:00.359 --> 0:18:02.800 can average eighty dollars a barrel or eighty five dollars 0:18:02.800 --> 0:18:03.399 a barrel for the. 0:18:03.400 --> 0:18:05.640 Rest of the year if it ends in a week, 0:18:05.880 --> 0:18:08.680 let alone longer. Yeah, it's a good point. 0:18:08.720 --> 0:18:11.199 We have to remember that going into this year, the 0:18:11.240 --> 0:18:15.080 market wasn't a surplus, so we are coming from a 0:18:15.119 --> 0:18:19.840 position of comfortable levels of inventories. Inventories in OCD they 0:18:19.880 --> 0:18:22.640 had been at pretty average levels going into the shop 0:18:22.800 --> 0:18:25.439 wasn't low. If you look at usspr okay, it was 0:18:25.520 --> 0:18:29.480 on the low side, but overall commercial stocks were pretty average. 0:18:30.040 --> 0:18:33.840 China strategic reserves are higher than normal. So we came 0:18:33.880 --> 0:18:37.520 in okay in stocks and with a surplus, and now 0:18:37.560 --> 0:18:42.520 we're eating away into that surplus and getting potentially into 0:18:42.520 --> 0:18:45.239 a death sits. So yes, to your point, there is 0:18:45.280 --> 0:18:48.800 a sustained impact on storage, but especially if we do 0:18:48.840 --> 0:18:51.880 get the release from the IA, that can be moderated 0:18:51.920 --> 0:18:55.439 over time, so that storage won't look that comfortable for 0:18:55.480 --> 0:18:59.080 a few weeks, but over enough months, say five, six, 0:18:59.200 --> 0:19:03.960 seven months, where that release from the IA ends, then 0:19:04.040 --> 0:19:06.480 you can be back at a more comfortable position. 0:19:06.800 --> 0:19:08.520 Sam Lisa told about the time it takes. Can we 0:19:08.560 --> 0:19:10.560 sit on that just for an extra bit? The difference 0:19:10.560 --> 0:19:14.359 between cutting production and shutting in production? What's the difference 0:19:14.400 --> 0:19:17.160 between those two headlines and why is it so significant? 0:19:17.840 --> 0:19:20.320 So the way that we think about it, it's more 0:19:20.359 --> 0:19:23.840 the difference between stopping exports and stopping production. So for example, 0:19:23.920 --> 0:19:29.680 if I stop exports today, but I have spare capacity 0:19:29.680 --> 0:19:32.960 on my inventories, then I can just stockpile stock, buy 0:19:33.040 --> 0:19:36.199 stock bio. When the chaos calms down, I can just 0:19:36.280 --> 0:19:39.000 send that back to the market. So you're delaying volumes 0:19:39.040 --> 0:19:42.359 as opposed to losing them. But when you're shutting in production, 0:19:42.440 --> 0:19:45.560 when you actually halt your production because you don't have 0:19:45.640 --> 0:19:48.639 work to put it, then that's production lost. 0:19:49.320 --> 0:19:52.880 This is the Bloomberg Survendans podcast bringing you the best 0:19:52.880 --> 0:19:56.240 in markets economics, Antient politics. You can watch the show 0:19:56.280 --> 0:19:59.240 live on Bloomberg TV weekday mornings from six am to 0:19:59.359 --> 0:20:03.119 nine am Easton. Subscribe to the podcast on Apple, Spotify 0:20:03.280 --> 0:20:05.480 or anywhere else you listen, and as always, on the 0:20:05.480 --> 0:20:07.920 Bloomberg Terminal and the Bloomberg Business app.