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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot Com, the Radio plus Global Act and on your radio.

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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Speaker 1: I'm Charlie Pawlett. Stocks continue to advance, the SMP five

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Speaker 1: hundred index trading above. It's May two thousand fifteen record close,

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Speaker 1: and we are brought to you by Bentley University. What

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Speaker 1: to tying up the finances at Converse and managing asset

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Speaker 1: allocations at JP Morgan have in common a business degree

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Speaker 1: from Bentley University. Because business is everywhere, prepare here. Dow

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Speaker 1: Industrial is rallying two hundred fifty five points to eighteen thousand,

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Speaker 1: one hundred fifty one, a gain there of one point

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Speaker 1: four percent. The SMP five hundred index now at twenty nine,

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Speaker 1: up thirty one points, a gain of one and a

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Speaker 1: half percent. As stack up seventy eight points, a gain

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Speaker 1: of one point six percent. The tenure up five thirty

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Speaker 1: seconds yield one point three six percent, Gold up fifty

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Speaker 1: It's little changed the thirteen sixty two. The crude oil

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Speaker 1: also little changed, up ten cents for barrel on West

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Speaker 1: Texas and immediate again narrow point. I'm Charlie Pellott and

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Speaker 1: that's a Bloomberg business flash. This is taking stock with

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Speaker 1: Pim Fox and Kathleen Hades on Bloomberg Radio. The energy

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Speaker 1: market oil in particular, just when it seemed that the

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Speaker 1: bottom was in for oil and maybe the worst of

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Speaker 1: the decline was over, and certainly that seems so for

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Speaker 1: the year, we see more news that gasoline, crude oil

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Speaker 1: are still in heavy supply in the US and around

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Speaker 1: the world, and that has put down wear pressure on

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Speaker 1: crude oil. Again. We want to welcome back to the

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Speaker 1: show now Fottle Gate. He is one of the best

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Speaker 1: known oil and gas analysts and experts on Wall Street.

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Speaker 1: He's senior analysts in fact at Oppenheimer and Co. So

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Speaker 1: fottle first of all, what what is going on with

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Speaker 1: oil the last couple of days, Breggit was the impacting

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Speaker 1: things jobs, making people think that there's some more demand

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Speaker 1: and it's going to help the world economy going. And

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Speaker 1: the data from the US look like there's just you

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Speaker 1: know that the supply glutt is not really over yet.

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Speaker 1: Well again a new surprise here. Supplies over the inventory

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Speaker 1: level is about five year mark, and that's what really

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Speaker 1: spoke to the market. Uh. Oil production is declining in

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Speaker 1: the US, declining everywhere outside of OPEC. However, the rate

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Speaker 1: of decline is a lot less than what had expected.

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Speaker 1: So everybody was thinking that two years of low oil

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Speaker 1: prices would bring US production declient sharply lore that hasn't happened.

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Speaker 1: Why because the industry is a lot more smarter, much

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Speaker 1: more efficient. The allocate capital a lot better than what

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Speaker 1: you used to do two years ago, three years ago.

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Speaker 1: They can get do more with less, and therefore the

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Speaker 1: impact was not as great as expected. So it's almost

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Speaker 1: like good news bad news. It is the market one

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Speaker 1: to see percipens decline in US production to say, ah,

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Speaker 1: now applying demand will balance, inventory level will come down,

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Speaker 1: and oil prices were reba. So that's what has been

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Speaker 1: at the case and will continue to be the case.

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Speaker 1: But eventually oil oil supply and demand will that and

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Speaker 1: there isn't being The industry is not spending enough money

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Speaker 1: to keep production flat, let alone increase production. Therefore, when

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Speaker 1: you see the big companies, the X and the Chevron,

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Speaker 1: the BP and all these companies spending, but you know

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Speaker 1: you're talking about tens of billions of dollars of capitals

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Speaker 1: ending that is not coming back, if you will, to

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Speaker 1: the energy market because of the local prices. So in

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Speaker 1: two or three years from now, we are going to

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Speaker 1: be in a situation where we will have much lower

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Speaker 1: supply if you will, and the demand even if if

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Speaker 1: the global economy is not strong enough, if you will,

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Speaker 1: you still have demand growth even half a percent. Here

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Speaker 1: the world is still using ninety three million barrel the

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Speaker 1: day of oil. So people exaggerate obviously the movement in

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Speaker 1: oil prices on a weekly basis because of the inventory.

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Speaker 1: Because but at the end of the day, you know,

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Speaker 1: I see, you know light at the end of the tunnel,

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Speaker 1: that oil prices wilcome much higher, will not stay at

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Speaker 1: the current level because the current proble will not generate

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Speaker 1: sufficient capitals to maintain in production at the current level.

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Speaker 1: So I wonder if you could speak a little bit

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Speaker 1: about dividends and the safety of dividends from some of

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Speaker 1: the larger oil companies. For example, Excen Mobile the dividend

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Speaker 1: now is over three, the Chevron dividend over four, Royal

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Speaker 1: Dutch Shell nearly six percent, and so on. Are there

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Speaker 1: oil companies you would recommend to investors who are looking

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Speaker 1: for dividend income all these punk that is have dividend.

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Speaker 1: The only way that they really return, you know, any

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Speaker 1: sort of return to the shareholder, it's through dividend growth.

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Speaker 1: Not only dividend, but dividend growth. Excel Mobile has been

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Speaker 1: increasing its dividend for thirty five consecutive years. Obviously, then

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Speaker 1: is the big sister and all the other companies, whether

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Speaker 1: Chevron or Shell or be here, all these companies do.

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Speaker 1: You look at Excel and see what ExM does. It's

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Speaker 1: not easy for a company like x M, which is

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Speaker 1: really not growing, to increase davidend for three decades uninterrupted,

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Speaker 1: where all places were ten dollar or part there a

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Speaker 1: hundred dollars, it didn't matter. X On increased dividend earlier

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Speaker 1: this year by five point seven and continue to do that.

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Speaker 1: So going forward there to increase is definitely going to

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Speaker 1: slow because Xxon and Shell and all these companies would

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Speaker 1: not have pree cash flow in order for them to

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Speaker 1: increase the dividends. So daviden will be maintained and most

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Speaker 1: likely for company like x AND will continue to grow,

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Speaker 1: albeit at much lower rate. Follow trific story on the

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Speaker 1: Bloomberg Today, Big oils billion dollars of new project signals

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Speaker 1: spending revival by our colleague rug team Katake and basically

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Speaker 1: emboldened by rising crewde prices, low costs, big companies like

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Speaker 1: Chevron a VP doing these big expansions. Is this, uh,

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Speaker 1: just another sign that the days of bucks of barrel

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Speaker 1: oil are long gone. Because as soon as the price

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Speaker 1: is up a bit, boom move ahead. There is no

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Speaker 1: question in my mind what brew the twenties seven dollar

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Speaker 1: oils in February, which was the lowest eleven in thirty years.

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Speaker 1: Was the hundred and ten dollar oil we had a

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Speaker 1: couple of years ago. Oil prices do not move in

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Speaker 1: any logical you know or protectable fashion. Lower oil prices

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Speaker 1: will bring higher oil prices, and higher oil prices will

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Speaker 1: bring lower oil prices. So uh, in my view, the

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Speaker 1: industry should look at sixties sixty five dollar oil as

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Speaker 1: longer term sustainable price. Uh. Forget about forty because it's

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Speaker 1: not going to last too long, and forget about hundred

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Speaker 1: because obviously from experience we see that it doesn't last

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Speaker 1: too long. And right now I'm ex screwed. The trading

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Speaker 1: higher by about two tents of a percent at forty

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Speaker 1: five dollars and twenty four cents we're of course speaking

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Speaker 1: with Fatio Gate, senior analysts at Oppenheimer and Company. Can

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Speaker 1: you comment on the terrorist attacks in Saudi Arabia and

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Speaker 1: what that means to all investors in the past such

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Speaker 1: an attack, whether you know, push all the prices you know,

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Speaker 1: five ten dollar or whatever not in the less three

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Speaker 1: or four or five years. I mean, you know, people

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Speaker 1: are beginning to get used to this bad news is

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Speaker 1: it's unfortunate, but it is a fact. It's not really

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Speaker 1: a factor anymore. It's not driving oil prices up or

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Speaker 1: down or sideway people just totally ignored. People are looking

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Speaker 1: at fundamentalits, you know, what kind of inventory, what kind

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Speaker 1: of demand, what kind of supply, And there is aliens

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Speaker 1: in the industry actually is creating its own problem because

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Speaker 1: I just said before, the industry is much more efficient

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Speaker 1: than it was two years ago because they forced to

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Speaker 1: be more efficient, otherwise it would be go out to

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Speaker 1: out of business. So the rate of the client is

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Speaker 1: a lot, you know, lower than before. So people are

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Speaker 1: not worried about what happened in Saudi Arabia or Coait

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Speaker 1: and all these countries. We are more concerned about what

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Speaker 1: is happening in the US because sill has brewed about

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Speaker 1: this disruption, if you will, in the global oil market.

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Speaker 1: It is no longer Saudi Arabia that the swim producer is.

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Speaker 1: The shild in the US is going to be the

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Speaker 1: swim producer. And we know even when the prices were tumbling,

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Speaker 1: a lot of the figures that are banning about. One

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Speaker 1: of them was what around thirty five dollars a barrel

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Speaker 1: with a lot of the show producers can just barely

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Speaker 1: afford to operate, and when they can, they do so.

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Speaker 1: Your official new range for crude oil now, fottle sixty

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Speaker 1: five dollar oil is the longer term sustainable oil price.

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Speaker 1: Too high, too much higher than that, or too uch slower,

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Speaker 1: it's not gonna be sustainable. So in terms of uh,

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Speaker 1: this disconnect between the refiners in the United States and

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Speaker 1: the crude oil and the gasoline price and the crude

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Speaker 1: in a nutshell, what's going on? How's that going to

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Speaker 1: work out? Well? A couple of things. Uh. What happened

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Speaker 1: is day tining industry has had incredible will run over

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Speaker 1: the last five years. Some of these starts are up

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Speaker 1: over the last two years. But like anything else in life,

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Speaker 1: nothing is sustainable in this business. Or any other business.

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Speaker 1: And so far this year refining stacks had been the

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Speaker 1: worst performed stacks. The major integrated AT companies are by

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Speaker 1: by twelve percent, the independent re China, the independent producers

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Speaker 1: are up by the other service industries up about five percent,

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Speaker 1: but the refiners are down by thirty plus percent. Some

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Speaker 1: of them are down forty five percent. And there even

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Speaker 1: being the biggest driver has been the discount between Deblity

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Speaker 1: Eye Crews, which is our benchmark, and brand which shrank significantly,

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Speaker 1: and that Erouded you know, crack spread the margin. And

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Speaker 1: this is a margin business. Lower margin me and lower

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Speaker 1: profits me and lower prices. So the definder is not

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Speaker 1: going to be in the penalty box for a long time.

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Speaker 1: Fado Gate, senior analyst, Oppenheimer and Company. This is taking

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Speaker 1: stock and this is Bloomberg