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Speaker 1: This is Bloomberg Surveillance. I think there are some signs,

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Speaker 1: some early signs that manufacturing is rebounding, including in the US.

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Speaker 1: An investment outlook beyond three or four years, to me

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Speaker 1: is more barry, like a religion or a philosophy than

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Speaker 1: a forecast business. Economy is just stuck there. Used to

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Speaker 1: be stuck above two percent. Now it seems to be

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Speaker 1: stuck in this one and three quarters to to a

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Speaker 1: quarter type grass right, Bloomberg Surveillance your link to the

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Speaker 1: world of economics, finance and investment on Bloomberg Radio. Good

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Speaker 1: morning everyone, Michael McKee and Tom Keane, we say good

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Speaker 1: morning to all of you worldwide. Special shout out one

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Speaker 1: b Rittenholtz Berry Rindholes helping out last week as Michael

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Speaker 1: was off. Say thank you to very old Look for

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Speaker 1: him on Bloomberg View and Masters in Business as well

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Speaker 1: in this hour, Oil we got it. This is what

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Speaker 1: we love to do with surveillance. Joining us later, Lord

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Speaker 1: Brown will join us. Of course, John Brown for decades

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Speaker 1: involved with British petroleum. We'll talk to him a little

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Speaker 1: little bit about BP, but much more about the greater

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Speaker 1: oil business in his book Project Um as well. We

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Speaker 1: look at the market, economics and strategy of oil. Michael

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Speaker 1: Cohen and Barclays UH to join us here in a

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Speaker 1: moment of course, Oil South earlier than green on the

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Speaker 1: screen right now, thirty seventy on West Texas Intermediate. We

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Speaker 1: need to look at foreign exchange Yen Stronger. The four

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Speaker 1: X brief brought you by Interactive Broker's winner of FX

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Speaker 1: Weeks two thousand and fifteen award for the best reach

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Speaker 1: out for X trading platform visit ib and ib kr

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Speaker 1: dot com slash four x. We thank Interacting Brokers for

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Speaker 1: their support. Yeah, ever stronger, one eleven thirty six. Let

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Speaker 1: me get the Bloomberg terminal chart up here for the

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Speaker 1: yen I want to get on a daily basis, where

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Speaker 1: we are, Yeah, we're right there, where we are, right

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Speaker 1: there at the low tick this morning, one eleven thirty five.

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Speaker 1: Right where we are now is a new low, a

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Speaker 1: new stronger ye. And I should say over the last

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Speaker 1: weeks and months as well, that's very very important Euro

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Speaker 1: one fourteen zero one with a weeker dollar. UH this morning.

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Speaker 1: All of this filters back to a market that won't

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Speaker 1: go down. David Wilson, when did the market like on

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Speaker 1: a weekly basis last go down. You and I were younger. Indeed,

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Speaker 1: we were just taking a quick look at the standard ports. Well,

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Speaker 1: I mean it was it's been up six of the

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Speaker 1: last seven weeks, okay, And that code is h CPS

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Speaker 1: space w correct on the look at that a font

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Speaker 1: of Bloomberg terminal wisdom. Well, you know, when you need

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Speaker 1: information in a hurry, you learn how to get it.

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Speaker 1: Did you buy a Tesla this weekend? Did you get

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Speaker 1: in a line with your thousand dollars? I did not?

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Speaker 1: How about you know? Now? Well, I'll tell you. Two

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Speaker 1: hundred and seventies six thousand reservations were made for the

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Speaker 1: new Tasla Model three through Saturday. That's according to a

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Speaker 1: twee from chief executive Alon Musk. He wrote that the

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Speaker 1: total was more than double with Tesla expected, and each

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Speaker 1: would be buyer paid a thousand dollar deposits. So you know,

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Speaker 1: you're talking about a whole lot of money flowing into

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Speaker 1: Tesla's coffers. And Tesla shares up four percent in early trading.

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Speaker 1: Beyond that, it's all about deal making. Virgin America up

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Speaker 1: almost the carrier back by billionaire Richard Branson accepted a

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Speaker 1: two point six billion dollar offer from Alaska Air Group. Now.

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Speaker 1: People familiar with the matter said Virgin America was also

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Speaker 1: a target for Jet Blue Airways, so it looks like

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Speaker 1: Alaska Air prevailing. That's not going over so well for

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Speaker 1: that stock. Alaska Air down about five percent in early trading.

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Speaker 1: Ruckus Wireless up thirty one percent, the maker of wireless

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Speaker 1: networking equipment of Greedway one a half billion dollar take

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Speaker 1: over by Brocade Communications, which expects the cash and stock

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Speaker 1: deal to lift profit by the first quarter of its

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Speaker 1: next fiscal year. In spite of that forecast, Brocade down

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Speaker 1: about eight percent in early trading. Axioll up two percent.

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Speaker 1: The chemical maker turned down a higher takeover offer from

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Speaker 1: Westlake Chemical, which stead it would start a proxy fight

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Speaker 1: for control of the board. Westlake increased it's offered by

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Speaker 1: about seventeen percent to one point six five billion dollars.

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Speaker 1: And then we have a bigger deal which may not happen.

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Speaker 1: We're talking about Baker Hughes. It's down about two and

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Speaker 1: a half percent in early trading. The US Justice Department

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Speaker 1: may move to block Halliburton's proposed twenty five billion dollar

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Speaker 1: takeover of the oil Field Services Company as soon as

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Speaker 1: this week. That's according to the New York Post setting

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Speaker 1: unnamed people familiar with the matter. UH Edwards Life Science

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Speaker 1: is up percent. The medical device maker's newest aortic valve

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Speaker 1: had less risk of death or stroked and surgery and

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Speaker 1: a study. The research involved a lower risk group of

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Speaker 1: Americans who can't currently get the device. So what potential

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Speaker 1: for a wider market down the line. So now it's

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Speaker 1: caused a note. J. C. Penny up two percent, the

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Speaker 1: department store chain raised to buy from newtra North Coast Research,

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Speaker 1: and Smith and Wesson down five and a half percent.

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Speaker 1: The gunmaker was reduced to the equival a hole from

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Speaker 1: by a BB and T Cowen and cel King. Very good,

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Speaker 1: David Wilson, thank you so much. Just a quick note

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Speaker 1: Richard Clarida with an exquisite note out at pimco UH

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Speaker 1: this morning. I can't say enough about it. Gorgeous charts

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Speaker 1: and the clarity that I don't mean to make the pun,

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Speaker 1: the clarity that Clarada is known for. It is superb

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Speaker 1: and the killer chart is labor share of national income

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Speaker 1: rising steadily. It's a complex chart. I'm not gonna retweet

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Speaker 1: it out, but go see Clarida at PIMCO. It is

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Speaker 1: just superb Michael Cohen begins our our coverage of hydrocarbons

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Speaker 1: right now. He is Barkley's head of Energy. Come out

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Speaker 1: of your research, Michael, thrilled to have you on, particularly

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Speaker 1: before Lord Brown. When I look at oil, can I

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Speaker 1: scream stability? Can I scream range before I find a

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Speaker 1: new terminal value? Or could oil drive lower? Thanks Tom

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Speaker 1: for having me. Um. You know, we do think that

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Speaker 1: that oil is not going to be very stable this year,

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Speaker 1: and we we are forecasting, you know, on a quarterly

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Speaker 1: basis that prices do have higher and hit about forty

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Speaker 1: five dollars for w T by the end of the year.

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Speaker 1: But in the meantime, you know, week to week and

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Speaker 1: month to month, it's going to be a very volatile market. Um.

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Speaker 1: You know what we're seeing right now is these broader

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Speaker 1: macro shifts in sentiments, Um, and that's driving oil lower

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Speaker 1: and higher, Uh, depending on the positioning. That is it

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Speaker 1: extremes for many different asset classes. So to the extent

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Speaker 1: that it's steam driven by the dollar and also by

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Speaker 1: the fundamentals. You know, things are seeming to shift every

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Speaker 1: every other week, and I think the recent move lower

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Speaker 1: that we've seen is really being driven from a fundamental

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Speaker 1: perspective by UM A lot of concern about this opex

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Speaker 1: freeze in April, which we don't is that why we

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Speaker 1: would you do you agree with that legitimate guest amout

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Speaker 1: of why were you driven lower? No? I think that

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Speaker 1: that's spurred it. But I think there's a there's other

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Speaker 1: concerns in terms of you know a lot of different

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Speaker 1: supply side outages that have returned to the market. UM.

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Speaker 1: And so now that that oil is producing, that's that's

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Speaker 1: provided some moved down. But I do think that it's

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Speaker 1: part of the broader um concern in the macro about

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Speaker 1: the macro economy and about China UM and what the

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Speaker 1: kind of peely reading of what the set is going

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Speaker 1: to do UM. And I think that that, you know,

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Speaker 1: broadly speaking, one yell and UM you know, gave her

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Speaker 1: speech UM and the decision a couple of weeks ago.

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Speaker 1: Now at least we've we've moved, we've back checked a

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Speaker 1: little bit from that, and the dollar move has has

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Speaker 1: taken a little with it. What is gonna lead us

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Speaker 1: back to the forty five dollar area you talk about?

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Speaker 1: When I went on the holiday ten days ago, we

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Speaker 1: were oil was in the low forties. Now we're back

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Speaker 1: down to thirty six for West Texas brand. Um, what's

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Speaker 1: the turning point? So the turning point that we see

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Speaker 1: for oil is really I think going to come as

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Speaker 1: we move through this summer. Demand is still strong. We

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Speaker 1: still see Indian demands, the needs demand, and even parts

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Speaker 1: of US demand that is still strong. We remember we're

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Speaker 1: moving into the shoulder season for demand right now. As

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Speaker 1: we come through to the summer, we still think that

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Speaker 1: at a little at a low retail gasoline price, we

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Speaker 1: still have more upside potential for demand growth this year.

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Speaker 1: What we see is really driving the curve through the

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Speaker 1: remainder of this year is the US supply is going

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Speaker 1: to continue to come off. We had some delays with

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Speaker 1: the new US production with US production data, where we

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Speaker 1: should see new US supply and demand data in the

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Speaker 1: course of the next day, and I think that that

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Speaker 1: will reaffirm that the supply side adjustment is moving forward.

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Speaker 1: The problem is is that we've built up so much inventory,

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Speaker 1: so what we see is is really kind of keeping

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Speaker 1: prices not moving even higher than that forty five dollars

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Speaker 1: that you've got a very large backlog of wells that

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Speaker 1: have been drilled but not completed. And then in addition,

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Speaker 1: we've built up more and more inventory for the last

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Speaker 1: eight quarters, so it's gonna be very difficult for us

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Speaker 1: to move higher than that forty dollar level. But by

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Speaker 1: the end of the year and after a peak summer

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Speaker 1: driving season, we do think that enough damage will have

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Speaker 1: been done to the supply side to need higher prices

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Speaker 1: to fill the void. Because it's not a light switch.

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Speaker 1: That's the important thing to understand here. I think it

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Speaker 1: beautifully describes a complexity of the market. We're gonna come back, Michael,

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Speaker 1: but very quickly. Here. How does net gas fold into

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Speaker 1: the dynamics of oil? Mike and I were really taken

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Speaker 1: back by that plunge a number of months ago. So

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Speaker 1: for the natural cast side, it's it's similar. And when

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Speaker 1: you have a lot of supply and not really enough

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Speaker 1: demand and starting to change this year, so we see

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Speaker 1: you know, the new LG facility and to being past

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Speaker 1: starting to ramp up. You see more and more coal

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Speaker 1: fired plants that are being that are being retired. So

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Speaker 1: there's a much more um kind of constructive demand story

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Speaker 1: for natural gas than what you have for oil. And

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Speaker 1: it's It's also important to understand that natural gas is

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Speaker 1: not yet really a global commodity. So to a certain extent,

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Speaker 1: you have the ability, if we have a warmer than

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Speaker 1: normal summer, to see prices move higher, also because you

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Speaker 1: have new pipelines that move natural gas Mexico. Let's do

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Speaker 1: this just because the time I Co'm gonna cut you off.

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Speaker 1: We're gonna come back with Michael Cohen of Barclays UH

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Speaker 1: and continue this discussion before we speak with Lord Brown

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Speaker 1: of BP. I check out with like get the latest

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Speaker 1: world in national headlines. Fine, my Tom, thank you very much.

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Speaker 1: With the Wisconsin primary tomorrow, Republican presidential can to date,

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Speaker 1: Donald Trump is calling on rival John Kasik to drop

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Speaker 1: out because he does not have a chance to win

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Speaker 1: the nomination. Trump says, if I didn't have Kasik, I

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Speaker 1: automatically win. Suicide attacks across Irack today killed at least

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Speaker 1: twenty nine people. The most deadly attack happened southeast Baghdad

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Speaker 1: at a restaurant frequented by Sheit paramilitary militia fighters. There

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Speaker 1: was apparently a brief scare in Times Square over the weekend.

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Speaker 1: According to The New York Times, police cleared it out

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Speaker 1: all authorities checked out a suspicious truck a box truck

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Speaker 1: at a bus stop Saturday night and had wires protruding

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Speaker 1: from its dashboard and gas canisters behind its seat. It

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Speaker 1: turned out the gas cans were empty and the driver

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Speaker 1: had been located. Global News twenty four hours a day.

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Speaker 1: I'm Michael bar Mike, Tom, Michael, thank you so much.

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Speaker 1: It was a mixed screen on the screen, right on

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Speaker 1: the screen. In the equity markets, a yield flat one

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Speaker 1: point seven six percent. Michael McKee and Chunky This hour

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Speaker 1: on Oil Michael Cohen of Barclays with us. It's Bloomberg's

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Speaker 1: Surveillance Market Drivers brought you by Bentley University has prepared

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Speaker 1: you project our millennials ready for the workplace to prepared you.

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Speaker 1: Research study has answers that might surprise you. Is it

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Speaker 1: This is a Bloomberg Business Flash And I'm Karin Moscow.

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Speaker 1: CME Group u S Stock index futures are little changes.

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Speaker 1: Investors look for fresh queues to extend a rally after

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Speaker 1: the S and P five hundred closed at its highest

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Speaker 1: level of We checked the markets every fifteen minutes throughout

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Speaker 1: the trading day. On Bloomberg SNP eveny futures again little change.

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Speaker 1: So are DOWI E many futures NaSTA documny futures down

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Speaker 1: four the acts in Germany's up four tenths per set

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Speaker 1: ten Your treasury little change yield one point seven seven

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Speaker 1: percent yield on the two year point seven four percent.

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Speaker 1: Now I'm ex screwde oil down a tenth of upper center,

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Speaker 1: three cents to thirty six seventy six of barrel call

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Speaker 1: Mike Gold down a tenth of upper center, A dollar

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Speaker 1: thirty to twelve twenty two twenty announced the euro A

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Speaker 1: dollar thirteen nine eight b and one eleven point three

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Speaker 1: nine the nest of Bloomberg Business Flash. Tom and Mike Karen,

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Speaker 1: thanks so much. Appreciate that this morning, Bloombrick surveillance. We

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Speaker 1: welcome all of you. Michael Cohen with us. He's with

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Speaker 1: Barclay's head of Energy Community Research. Michael, I love what

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Speaker 1: you've got with He does these great single sentences. China's

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Speaker 1: strategic petroleum reserve should add a hundred gazillion barrels in

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Speaker 1: two thousand sixteen, but officials have cast a cloud on

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Speaker 1: the pace for the builds a phase three Michael Cohen,

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Speaker 1: what is phase three of China's ability to put oil

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Speaker 1: and salt mines? Right? So, what China is doing is there,

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Speaker 1: over the course of three different phases, they're trying to

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Speaker 1: fill out what will amount to a strategic petroleum reserve

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Speaker 1: that will enable them to have enough oil on hand

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Speaker 1: to cover ninety days or so of their consumption. And

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Speaker 1: so for the past I would say probably decade, they've

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Speaker 1: been building up this storage capacity and they've taken the

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Speaker 1: opportunity of oil prices being low to really jump start

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Speaker 1: that that effort, and they've been building out the capacity

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Speaker 1: at a higher pace over the last year and they're

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Speaker 1: going to continue to do that for but I think

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Speaker 1: the the issue right now facing the Chinese authorities that

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Speaker 1: they kind of talked about in the new five year

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Speaker 1: Plan and the most recent Congress as they said, you know,

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Speaker 1: if companies are not going to be their they're basically

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Speaker 1: not going to enforce the companies um and spend other

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Speaker 1: you know, storage operators are going to not going to

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Speaker 1: have to build capacity at the same pace as they

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Speaker 1: have in the past. And I think that goes to

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Speaker 1: the concern over how much Chinese or what China the

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Speaker 1: oil demand growth will look like over the medium term.

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Speaker 1: The answers the heart of the matter is we don't

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Speaker 1: know a lot of the demand dynamics nation and nation doing.

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Speaker 1: You know, we we don't. And I think the issue

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Speaker 1: right now is that at least in the United States,

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Speaker 1: we're coming out out of a winter where demand for

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Speaker 1: heating and demand for diesel because of the slowdown in

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Speaker 1: in rail and the slowdown in drilling activity is negative.

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Speaker 1: The same kind of thing is happening in Europe, the

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Speaker 1: same kind of thing is happening in many other O

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Speaker 1: E C D countries. The demands for diesel and for

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Speaker 1: middle displits is likely go to be very very weak

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Speaker 1: over the course of this next year. And that's going

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Speaker 1: to happen as well in non o E CIT countries.

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Speaker 1: So you have a situation globally, and I think this

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Speaker 1: is really important for the for the oil market this year.

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Speaker 1: You have a situation globally where global demand is being

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Speaker 1: supported by transport fuels, not by industrial led demand, and

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Speaker 1: that industrial led demand is one of the most important

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Speaker 1: components of the one point five one point six million

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Speaker 1: barrel a day demand growth profile that we've seen over

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Speaker 1: the last couple of years. How do we divide I mean,

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Speaker 1: when you say transport, we're talking about moving things from

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Speaker 1: the industrial users to the end users. Well, it's that

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Speaker 1: in part, but I think the biggest component of the

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Speaker 1: transport demand is just you know, personal vehicles. So you know,

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Speaker 1: in China is going to be as as you know,

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Speaker 1: the consumer ends up having the higher income, they're going

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Speaker 1: to be demanding more airline tickets, They're going to be

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Speaker 1: buying more SUVs, more cars. Generally in the United States,

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Speaker 1: it's the same same thing. Up until this last month,

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Speaker 1: we've seen very strong vehicle sales that are replacing the

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Speaker 1: vehicle stock in India. This similar you know a lot

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Speaker 1: of new vehicle sales that's adding to global demand, but

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Speaker 1: the industrial lead side of it is not going to

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Speaker 1: be there and that's that's been a very important part

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Speaker 1: of the demands for the last couple of years. Thank

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Speaker 1: you so much, greatly appreciated. Michael Cohen of Barclays, their

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Speaker 1: head of Energy Commodities Research, Mike, when you were gone

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Speaker 1: at Morris' City group had uh a moment there in

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Speaker 1: the cover of the f T. There's just huge, huge

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Speaker 1: mystery about whether oil and the backdrop of that was

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Speaker 1: John michaels Waite's interview with the Deputy Crown Prince of

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Speaker 1: Saudi Arabia last week the Detris So that was the

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Speaker 1: new capitalism in Saudi Arabia, the Sovereign Wealth Fund build

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Speaker 1: up and all that, and you know, I guess spinning

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Speaker 1: off some of a Ramco. But the massive mystery here

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Speaker 1: is with the price of oil here at forty I

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Speaker 1: have no opinion. Nobody, nobody seems to know. I actually,

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Speaker 1: when I was on my travels, met with a guy

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Speaker 1: who owns a bunch of leases in North Dakota and

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Speaker 1: he said, we have as many rigs on our property

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Speaker 1: as we ever did, he said, but they're horizontal now

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Speaker 1: parked and not drinking and uh, he said, it's been

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Speaker 1: just amazing to watch North Dakota go from a massive

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Speaker 1: whirlwind of activity to a dead stop right and and

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Speaker 1: then the heart of it is do they do what

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Speaker 1: I'll call from three crises ago a mid look and

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Speaker 1: no again, no one knows the duration and the dynamics

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Speaker 1: of supply, the elasticity of supply or demand going to June,

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Speaker 1: let alone, June of two thousand eighteen, a huge mystery. Well,

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Speaker 1: we are working on the supply side. Supply is being

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Speaker 1: cut back, but the demand side, there's their own mystery.

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Speaker 1: As you as you were men and Katie Stockton I

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Speaker 1: thought was wonderful earlier, and I think she and I

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Speaker 1: agreed that when you look technically at the price and

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Speaker 1: you can use either West Texas or Brent, it doesn't matter.

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Speaker 1: And some people make a big deal about the two

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Speaker 1: dollars spread down. But but the idea that it's indeterminate,

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Speaker 1: which is a mathiness phrase for I can't what that

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Speaker 1: means is I can't make a guess either way, just

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Speaker 1: that simple h And there's a bunch of mumbo jumbo.

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Speaker 1: A d X d M I is one study that

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Speaker 1: I use. It shows that the trend of oil is

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Speaker 1: wildly indeterminate, right now thirty six seventy one. A barrel

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Speaker 1: on West Texas. Run on the screen, a little bit

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Speaker 1: of green and we've rolled over slightly. Brent crew a

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Speaker 1: dollar fifty more thirty four. It certainly nowhere near the

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Speaker 1: eighty dollars. A barrel that McKey knew before he went

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Speaker 1: away in his vacation. Yeah, that was those. Those are

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Speaker 1: the oldness. Not many people saying we get back to eight.

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Speaker 1: We need to get the markets open. Bloomberg surveillance. We're

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Speaker 1: kinding down to the opening bell. Brought to you by

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