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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 Mobile 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 Palett's stocks are fluctuating. The SMP now trading higher,

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Speaker 1: up a point again there of point one percent. That

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Speaker 1: index is stalling just below the level right now. Gold

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Speaker 1: is down three ten the ounce to twelve twenty, a

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Speaker 1: drop of three tents of one percent. Crude lower now

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Speaker 1: by one cent, forty nine dollars fifty four cents did

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Speaker 1: trade about fifty dollars. Apparel Brent seventy five up one

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Speaker 1: cent now again there of less than point one percent.

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Speaker 1: So again recapping a mixed picture for stocks. The Dow

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Speaker 1: is down fourteen a drop of point one percent, SMP

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Speaker 1: up a point, a gain of point one percent. I'm

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Speaker 1: Charlie Pallet. That's a Bloomberg Business flash. You're listening to

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Speaker 1: Taking Stock with Kathleen Hayes and Pim Fox on Bloomberg Radio.

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Speaker 1: So where do we go from here? For oil prices?

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Speaker 1: Demand is a slow moving elements. Supply sometimes isn't, and

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Speaker 1: despite near record inventory, traders are pricing in the risk

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Speaker 1: of the market getting tighter in a hurry. Here to

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Speaker 1: tell us more. Stuart Glickman is director and equity research

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Speaker 1: analyst for SMP Capital i Q. He joins us now, Stewart,

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Speaker 1: thanks very much for being with us. Good afternoon. All right,

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Speaker 1: so give me your short term and long term view

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Speaker 1: for oil price action. Short term embarrassed. I think that

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Speaker 1: the recent move up has been really it's been premised

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Speaker 1: on a lot of all call temporary phenomenon, phenomenon that

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Speaker 1: I think are going to eventually dissipate, and I think

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Speaker 1: fundamentals are going to come to bear because structurally, uh,

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Speaker 1: there's way too much crude oil in inventories, record highs,

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Speaker 1: the highest we scene since nineteen thirty more or less. Uh.

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Speaker 1: Product inventories for things like gasoline, diesel, jet fuel are

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Speaker 1: also wey above their five year averages. Uh. Um. You know,

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Speaker 1: it's interesting to look back at um when when crude

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Speaker 1: prices began their their initial collapse in in mid about

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Speaker 1: two years ago, we had about maybe two million barrels

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Speaker 1: a day of excess supply, and even though supply started

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Speaker 1: to pull back, demand really hasn't been all that impressive.

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Speaker 1: And now we're still sitting with about one and a

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Speaker 1: half million barrels a day of excess supply according to

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Speaker 1: the numbers that I'm seeing from ben Tech Energy, which

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Speaker 1: is part of us in people of the plats, and so,

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Speaker 1: you know, I think about this short term, I think

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Speaker 1: that we still need a further leg down on crude

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Speaker 1: prices that that just are not supported by sundamental send

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Speaker 1: how much of the down Stewart so bent Tech is

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Speaker 1: looking for an average of about thirty nine dollars excuse me,

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Speaker 1: thirty nine dollars a barrel in twenty sixteen, but improving

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Speaker 1: to about fifty dollars a barrel in twenty seen. Um,

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Speaker 1: if you look at it from an an individual company perspective,

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Speaker 1: we started to see several major firms talk about what

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Speaker 1: do we take to get them to start you know again, um,

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Speaker 1: you know, incentivizing and additional additional production. Pioneer Natural Resources

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Speaker 1: and Devon Energy have both pointed to the fifty dollar mark,

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Speaker 1: which we just crusted above today and said that at

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Speaker 1: those prices, you know, we're gonna you know, dip our

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Speaker 1: toes back into the water again. I think other firms

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Speaker 1: are probably you know, looking at somewhere between fifty and

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Speaker 1: sixty and so you know, what it feels like is

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Speaker 1: a rerun of the experience we had last year in

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Speaker 1: spring and summer when Crewe prices went to sixty two

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Speaker 1: dollars of their all and then again collapsed. So I

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Speaker 1: think that another relapse, um, probably into the thirties seems

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Speaker 1: to me to be reasonable. Um. But you know, longer term,

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Speaker 1: I think eventually the supply will eventually give away. UM.

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Speaker 1: Just just just on on economics. Eventually they're going to

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Speaker 1: be some competitors that go away. And uh and then

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Speaker 1: I think then we're in store for a gradual uptick

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Speaker 1: in crewde prices. I just don't think go anywhere near

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Speaker 1: that yet. Stewart, And what if you can comment on

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Speaker 1: other companies in the energy complex, maybe refiners, and then

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Speaker 1: tell me about pipeline companies. Uh So, refiners actually have

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Speaker 1: been sort of the call it the shining star of

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Speaker 1: the oil patch for the last call it, you know,

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Speaker 1: twelve to eighteen months. They're the ones who are making

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Speaker 1: money while the upstream folks are are generating operating losses.

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Speaker 1: It's it's refining. That's that's the reason why a company

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Speaker 1: like an EXN Mobile continue to generate overall profits in

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Speaker 1: the first quarter of those those profits are starting to

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Speaker 1: come down a little bit because, you know, as I

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Speaker 1: mentioned before, the product inventories are still pretty high, and

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Speaker 1: so that started to weigh on their margins a little bit.

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Speaker 1: UM it's the one area within energy that I still

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Speaker 1: have a positive fundamental outlook on UM. So it's it's

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Speaker 1: you know, it's it's gonna it's it's gonna do its job.

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Speaker 1: It's going to generate some profits, just not quite as

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Speaker 1: nicely as it did the year before. UM pipelines, I

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Speaker 1: think are more interesting case. I think a lot of

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Speaker 1: pipeline companies which are structured as MLPs have have you know,

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Speaker 1: spent the last five years getting very acclimated to throwing

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Speaker 1: out huge dividends to their unit holders and also spending

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Speaker 1: tons of money on growth capital projects, and all of

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Speaker 1: that being supported by capital markets that seemed very willing

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Speaker 1: to continue to support them. And I think that business

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Speaker 1: model is increasingly coming into question. I think that more

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Speaker 1: of these mythstream companies we started to we started to

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Speaker 1: see some of them pull back on their capex uh,

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Speaker 1: and I think more of these companies are gonna have

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Speaker 1: to start living within their means you maintain a by

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Speaker 1: rating on X on mobile, you have chronical Phillips and

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Speaker 1: energy as hold ratings even though you are sort of

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Speaker 1: bearish overall. Uh, you have this. I think a lot

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Speaker 1: of people are wondering after this huge sell off if

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Speaker 1: they should jump in and buy some energy stocks. Is

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Speaker 1: X and then something someone should look at? And if so,

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Speaker 1: why so? I'm I have a buy on on Xon

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Speaker 1: mainly because I think it's a great defensive play in

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Speaker 1: an environment where I'm still very wary and there's there's

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Speaker 1: not that many companies that are likely to generate excess

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Speaker 1: free cash flow in x on being one of them.

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Speaker 1: And if you look at and it feels like, you

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Speaker 1: know a lot of these energy companies, even though they've

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Speaker 1: they've made a comeback in the last couple of months,

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Speaker 1: that they went so far down that they they obviously

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Speaker 1: must be cheap. But if you look at it on

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Speaker 1: a relative basis um you know, for example, relative to

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Speaker 1: their projected EVADA or they're projected cash flows, they actually

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Speaker 1: look relatively expensive on the whole. If I look at

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Speaker 1: our coverage universe of oil and gas exploration and production companies,

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Speaker 1: you know, the average E N p right now is

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Speaker 1: trading at about premium to its forward cash flow estimates,

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Speaker 1: which you know, some of them perhaps deserve multiple expansion,

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Speaker 1: but but not all of them. And so I think

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Speaker 1: I think there's a I think there's still a lot

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Speaker 1: of froth in these prices based on for the aftermates

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Speaker 1: have come down well, Stuart Glickman. Fascinating, fascinating conversation. So

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Speaker 1: I just want to I just want to be clear

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Speaker 1: on something you said. Your group is looking for thirty

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Speaker 1: nine dollars a barrel average price for crude oil heading

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Speaker 1: up to fifty bucks of barrel. Okay, great, but you're

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Speaker 1: still still pretty bearish overall. Fascinating conversation. Exxon, he's barishaw

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Speaker 1: on oil, but it's a good defensive play overall though,

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Speaker 1: even though they've follow in a lot energy stocks, not

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Speaker 1: necessarily that cheap. Stuart Glickman, Thank you so much, Director

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Speaker 1: and equity research analyst at SMP Capital. I Q. I'm

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Speaker 1: Kathleen Hayes along with pim Fox. This is taking stock

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Speaker 1: on Bloomberg Radio. Coming up on taking stock. Commercial property

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Speaker 1: sales they've slowed in the United States this year, but

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Speaker 1: Chinese investors continue to plow money into the market. We're

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Speaker 1: going to find out what foreign investment means for commercial

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Speaker 1: real estate. Next be