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

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: US Dock index futures are higher this morning and indications

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Speaker 1: stocks will trim their first weekly drop in four and

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Speaker 1: this is investors reassess stimulus measures in Europe. We check

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Speaker 1: the markets every fifteen minutes throughout the trading day on Bloomberg.

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Speaker 1: SNP E mini futures up about eighteen points now EVENI

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Speaker 1: futures have a hundred thirty nine NASA doc. EVENI futures

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Speaker 1: have forty six. The docks in Germany's up three point

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Speaker 1: three per cent ten Your treasury little change yield one

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Speaker 1: point nine three percent yield on the two year point

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Speaker 1: nine four percent. Nim X screwed oil of two percent

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Speaker 1: or seventy four cents to thirty eight fifty eight a

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Speaker 1: barrel co mex Goal, there's down four ten per cent

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Speaker 1: or five dollars to twelve six euro dollar two and

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Speaker 1: again went thirteen point six one. That's a bloomberg business flash,

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Speaker 1: Tom and Mike turn thanks so much, any number of

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Speaker 1: ways to go with Anthony U and a city group

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Speaker 1: as we look at hydrocarbons energy that guests in general, Anthony,

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Speaker 1: your colleagues in crime note to PERU kept their policy

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Speaker 1: rated four and a quarter percent. This is city group economics,

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Speaker 1: UH saying it was a bit of a surprise to

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Speaker 1: the markets. Is this the basic commodity turnaround play? Are

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Speaker 1: things so interdependent that if we finally find bottom and

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Speaker 1: we have a commodity turnaround as you alluded to UH

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Speaker 1: minutes ago, that it's basically the buy of a decade

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Speaker 1: or is it towards a range brown range bound flatness

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Speaker 1: when you look at all commodities. I think I think

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Speaker 1: that in terms of buying, that's certainly as it is

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Speaker 1: a very opportunity, but there are still a lot of

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Speaker 1: risks that's embedded in the market because if we look

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Speaker 1: at historically UM the same factors the driving to come

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Speaker 1: away markets, which is shale production on shell gas and

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Speaker 1: shale oil. Right now, on driving the oil side, UM,

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Speaker 1: it is possible that this year you might be seeing

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Speaker 1: a potential disappointment because last year, remember exactly the same time,

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Speaker 1: there was a lot of optimism about prices rising on

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Speaker 1: you know, a potential balancing in the market. Right, So

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Speaker 1: then that did not come through last year. This year,

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Speaker 1: the prospect of a balancing at the end this year

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Speaker 1: is much better. But then one also has to prepare

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Speaker 1: for a potential risk on the downside. And so then

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Speaker 1: the reason is if you look at company guidance on production,

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Speaker 1: especially in the US, UM they're looking for a you know,

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Speaker 1: production declined about at least on the E n P side,

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Speaker 1: might be about you know, fractor said present the client.

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Speaker 1: But companies tend to over um perform the guidance as well,

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Speaker 1: particular in production historically, So what if they do over

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Speaker 1: um over performers the guidance right So, UM, yes, right

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Speaker 1: now it is a very good at the end of

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Speaker 1: the year bounce looks very good. It's just that one

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Speaker 1: would have to be mindful of the potential downside. What

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Speaker 1: is the break even point in natural gas UM? How

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Speaker 1: far how far would we be from that? UM? In fact,

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Speaker 1: it should be somewhere around about two dollars and fifty

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Speaker 1: cents to about three dollars uh mbtu. The reason is

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Speaker 1: you're kind of looking at where the cost of production

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Speaker 1: would be including drilling, racking UH in the US Northeast

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Speaker 1: in the Pennsylvania, Ohio and West Virginia region, as well

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Speaker 1: as down the Gulf coast such as Louisiana's Henzel shale,

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Speaker 1: and how likely are we to get back to that

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Speaker 1: we're seeing uh maybe the magic of low prices work

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Speaker 1: in the oil industry. What about on the gas side? UM?

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Speaker 1: On the gas side, in fact, if you look at

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Speaker 1: we think that in ten UM because of the very

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Speaker 1: low prices of oil and gas right now in twenty sixteen,

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Speaker 1: so companies are not investing UH way under investing for

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Speaker 1: production and so in we might not see enough production

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Speaker 1: growth in seventeen when you have you know, expert to

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Speaker 1: Mexico expert by Ellen g of gas that's going to

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Speaker 1: boost demand substantially, which requires much more production growth than

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Speaker 1: what we are expecting. Looking at whether we can with

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Speaker 1: be in the time we go left with you, what's

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Speaker 1: your terminal value on oil? What's your terminal value on that?

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Speaker 1: Gas UM. I think thatfore, on the oil side, it

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Speaker 1: is we're trying to find about where the cost client

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Speaker 1: look right, and so therefore it is possible for that

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Speaker 1: uh so called a long run price could be you know,

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Speaker 1: in the fifties or sixty dollar rang and on the

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Speaker 1: gas side, UM it could be you know, somewhere around

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Speaker 1: the three dollar. It could be three you know ye,

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Speaker 1: because you're you're talking to double on that gas. That's right,

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Speaker 1: because if we think about UM right now in terms

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Speaker 1: of prices, where we are looking at whether it's sufficient

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Speaker 1: to motivate production. Over the last few years, high oil

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Speaker 1: prices definitely helped production growth because of something called associated

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Speaker 1: gas production come from oil wells, because when one drill

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Speaker 1: oil well, some gas would come out and some oil

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Speaker 1: wells and more gas and others. And this associated gas

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Speaker 1: production with belief was responsible for as much as off

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Speaker 1: the production growth between two dollars and learning two dollars

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Speaker 1: fifteen on the deaf side. So therefore, if you lose that,

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Speaker 1: then you have two very much dependent on the US

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Speaker 1: Northeast and the progreson dollars you took a share, but

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Speaker 1: there are also companies over there that are not in

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Speaker 1: the best financial form. So even the prices were to

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Speaker 1: rise through even two dollars or two in the low

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Speaker 1: two dollar range now and talking about dollars per mmbt,

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Speaker 1: then some of these companies may not even want to

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Speaker 1: produce more because they do not have or appetiture. This

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Speaker 1: has been wonderful, Anthony to U, and thank you so much.

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Speaker 1: Working with Edward mores it's City Group with a more

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Speaker 1: granular view and Mike, that was fascinating. There's some terminal

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Speaker 1: values that are up there. Yeah, we were not quite

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Speaker 1: there yet. Mike and I learned never to predict oil

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Speaker 1: and children. There's million quants out there with all kinds

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Speaker 1: of formulas trying to figure out I'm not gonna get.

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Speaker 1: That's fascinating. We protected don't call me up for his

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Speaker 1: rig count research. It's brilliant. And contact your city group, associate,

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Speaker 1: your branch of city group. Maybe they'll playing around natural

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Speaker 1: gas right now one point eight to five, a little

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Speaker 1: bit of a lift of Yeah, it's gone off the

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Speaker 1: last few days, oddly because it's gotten warmer. Well there's

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Speaker 1: you know, it's undeniable. There's a commodity lift. Excuse me,

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Speaker 1: you see that with West Texas Intermediate thirty eight fifty

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Speaker 1: six up seventy three assets a little bit higher earlier

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Speaker 1: in the getting there oft barrel. We need to get

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Speaker 1: the market open. It's Bloomberg surveillance. The Bloomberg Scheme Report

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