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Speaker 1: This is Bloomberg Surveillance. Most of global growth is dominated

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Speaker 1: by the emerging economies. China is the single lingest contributed

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Speaker 1: to overall global growth. Now, when we look at what's

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Speaker 1: happening in the US, that ultimately is going to be

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Speaker 1: the driver of policy settings around the world. As long

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Speaker 1: as the dollar remains on the defensive, not just to

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Speaker 1: the Europe but also to the end some emerging market currencies,

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Speaker 1: then the outlook for gold will continue to be good.

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Speaker 1: Bloomberg Surveillance your link to the world of economics, finance

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Speaker 1: and investment on Bloomberg Radio. Good morning. It is seven

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Speaker 1: am on Wall Street, seven pm in Kuala Lumpur, where

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Speaker 1: your ring it buys one point six percent less. After feed,

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Speaker 1: officials began suggesting markets are mispriced for the possibility of

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Speaker 1: a June move. Global equity markets lower, but bonds becalmed.

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Speaker 1: The head of a host of US economic indicators for you,

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Speaker 1: we have them all under surveillance. I Michael McKee along

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Speaker 1: with Tom Keane. Here's where we are this morning. The

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Speaker 1: stock six hundred in your up is down three points

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Speaker 1: nine tenths of eight percent. The docks is off by

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Speaker 1: eighty two points eight tenths of a percent, and the

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Speaker 1: foots see in London is down by seventy five points

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Speaker 1: one point to two percent. UH. That is being blamed

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Speaker 1: by traders on earnings and a mediocre economic outlook in Europe.

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Speaker 1: In the US, futures off by fourteen points, seven tenths.

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Speaker 1: Stal Evening future is a hundred and two points lower

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Speaker 1: six tenths. NASTAC futures down twenty nine. That's a seven

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Speaker 1: tenths drop. Earnings not so great here either. We have

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Speaker 1: one UH just crossing the Bloomberg professional service here, Time

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Speaker 1: Warner the UH the main company, the cable company, not

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Speaker 1: the um. Time Warner Inc. As opposed to cable adjusted

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Speaker 1: earnings to share down at forty nine. The forecast was

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Speaker 1: for a dollar thirty. We will know more about the

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Speaker 1: economy at eight fifteen and eight thirty. Bonds, as they say,

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Speaker 1: be calmed ahead of that little change in the curve.

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Speaker 1: With the tenure note, you'll one point seven nine percent,

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Speaker 1: the five year one point to five, and your two

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Speaker 1: year at seventy six basis points. But let's look at currencies.

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Speaker 1: The dollar index higher after San Francisco FED President John

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Speaker 1: Williams and Atlanta FED President Dennis Lockhart joined Dallas FED

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Speaker 1: President Robert Kaplan, who spoke with us last week, in

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Speaker 1: suggesting that if economic data comes in okay, June is

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Speaker 1: a very live meeting for the Fed. The euro is

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Speaker 1: lower this morning, the yen is at the moment about flat,

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Speaker 1: but a little bit higher one or six seventy three,

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Speaker 1: but still still much stronger. But it's emerging market currencies

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Speaker 1: where you really see the move. They ring it as

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Speaker 1: I noted down one point six percent, the Korean one

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Speaker 1: down one point two percent, the Rupia not of Indonesia

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Speaker 1: down six tenths and the Chinese move the u N

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Speaker 1: reference rate by the most in nine months right now,

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Speaker 1: going for UH six point five O four seven. It

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Speaker 1: is also the dollar uh an effect on oil usually

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Speaker 1: oil prices, though a little bit higher right now West

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Speaker 1: Texas four tents of eight percent, Bread Crew three tents.

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Speaker 1: Is that the chicken or the egg the dollar and

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Speaker 1: oil today? Skip York is principal oil research analyst at Wood,

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Speaker 1: Mackenzie and Houston. He is in our studios today. UH.

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Speaker 1: Usually you'd see the dollar go one way, all go

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Speaker 1: the other way. Has that correlation broken down over the

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Speaker 1: last some months because of the oversupply out there and

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Speaker 1: all the extraneous exogenous factors affecting the dollar. Yeah, I

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Speaker 1: think you're right. I think we've got We've just got

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Speaker 1: to confuse it. We've had a confusing market, not just

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Speaker 1: in oil, but and not just in the financials but

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Speaker 1: across all commodities. And I think the historical correlations have

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Speaker 1: broken down. Um, we've also had this technological change with

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Speaker 1: tight oil and how responsive it looks like it will

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Speaker 1: it could, it will be uh, and maybe those historical

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Speaker 1: relationships needn't now need to reset. And we're just in

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Speaker 1: that period of time where we we don't know what,

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Speaker 1: we don't know what what's the short term? Let me

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Speaker 1: ask you that because we do get the the inventories

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Speaker 1: dated today, oil prices have moved up significantly over the

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Speaker 1: last couple of weeks. We're still even though we've been

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Speaker 1: down for a couple of days, we're still in the

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Speaker 1: mid forties. But in the short run, where do you

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Speaker 1: think we go? Do we stay in this area, go

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Speaker 1: back down or start to go back up again. We

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Speaker 1: think that you know that the physical value of oil

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Speaker 1: is somewhere in the mid forties. We expect that there's

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Speaker 1: going to be volatility around it every sort of major event.

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Speaker 1: You know, there's a the expectation that today we're going

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Speaker 1: to see a build number that could possibly put downward

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Speaker 1: pressure on prices once the data comes out. You know,

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Speaker 1: we have another OPEC meeting coming in early June. UM.

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Speaker 1: The consensus expectation is that there will not be a

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Speaker 1: production cut similar to the last three meetings. That's probably

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Speaker 1: gonna another downward pressure moment for oil. But the trend,

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Speaker 1: and the reason why the trend is on the upswing,

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Speaker 1: is that we're starting to see those negative numbers coming

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Speaker 1: in and non OPEC supply. We're starting to see production

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Speaker 1: turnover from the us UH. It's starting to spread to

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Speaker 1: other parts of non OPEC. That's that, along with the

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Speaker 1: weakening dollar, is what's driving that that trend upward. But

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Speaker 1: there's always going to be these events that are gonna

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Speaker 1: put a down draft over you know, days or over

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Speaker 1: a few day period. Good news, Good morning, Ever, skipy,

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Speaker 1: work with this West Texas Intermediate three up eighteen since

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Speaker 1: bran crude up sixteen since Bloomberg surveillance. This morning brought

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Speaker 1: you buy Investco and let's go believes it's time to

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Speaker 1: bench the benchmarks to consider active management and factor based strategies.

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Speaker 1: Find out more and invests go dot com, slash high conviction.

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Speaker 1: One are the great things a Skip York about Woods

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Speaker 1: Mackenzie is you actually spend a lot of time asking

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Speaker 1: what are people actually doing, not what they're talking about.

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Speaker 1: What is the doing of the oil business in America

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Speaker 1: right now? I think the doing right now is that

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Speaker 1: it is still down in that hunker down phase. It

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Speaker 1: was sort of you know, adapt us. Now we were

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Speaker 1: in an adaptive phase in I think we're now in

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Speaker 1: that survival for days and the people who make it

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Speaker 1: to the other side are gonna be looking for the

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Speaker 1: growth phase when we get probably in late sixteen into

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Speaker 1: seen So what are they doing right now? There? They're

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Speaker 1: starting to ask themselves. They're starting to think about what

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Speaker 1: they do when oil prices allow them to reposition. And

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Speaker 1: the concern that the producers have is, you know, oil

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Speaker 1: prices get to get to a point where this well

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Speaker 1: is economic. Um, but am I gonna Am I gonna

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Speaker 1: have the financial ability to drill the well? Uh? Does

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Speaker 1: my balance sheets support a stronger drilling program? And then

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Speaker 1: can I actually get the work done? We increasingly hear

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Speaker 1: fears about the oil field services not being able to deliver.

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Speaker 1: One measure of the bounce back Michael McKee excellent. Down

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Speaker 1: from two thousand fourteen peaks and up off that bottom.

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Speaker 1: We better pressor red button. Let me give you an

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Speaker 1: even more current one here, noble uh energy. Um, they're

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Speaker 1: in the MP company out with earnings. You're not going

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Speaker 1: to be surprised to know that they have made fifty

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Speaker 1: three cents a share in the consensus was fifty seven.

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Speaker 1: But here's the headline that catches my eye. They're boosting

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Speaker 1: their yearly production view. Uh. Is this because prices are

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Speaker 1: going up and we're gonna see all these guys come

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Speaker 1: back into the market and put price pressure on prices again.

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Speaker 1: I think the revisions we're seeing now is that, you know,

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Speaker 1: you've got that inventory of drill but uncompleted wells, and

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Speaker 1: I think people are going to start tapping into those

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Speaker 1: and and and bleeding that inventory back down to sort

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Speaker 1: of historical norms. Uh. So those are relatively easy. You know,

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Speaker 1: in a rising oil price environment, those are the easy

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Speaker 1: barrels to go after because you've already sunk a lot

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Speaker 1: of the cost of the well. But once you've tapped

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Speaker 1: that inventory. What do you do next? And that's sort

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Speaker 1: of the that's sort of the does that last this tapping? Yeah,

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Speaker 1: we think they can go into the inventories that it's

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Speaker 1: you know, it is about a twelve month twelve to

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Speaker 1: eighteen month period before for them to bleed down those inventories.

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Speaker 1: But there will always be a mix. They will not

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Speaker 1: just do uncompleted wells. They'll be doing some new drilling

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Speaker 1: and someone completed wells. And what we'll see is that

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Speaker 1: the mix will change from completing on the the inventory

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Speaker 1: wells to drilling new wells. That's what we'll see that

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Speaker 1: shift over the Christian I haven't asked in all the uh,

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Speaker 1: the emotion of the last two years from a hundred

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Speaker 1: dollars down to forty dollars is the romance of deep

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Speaker 1: sea oil? Does it just not make sense anymore? I mean,

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Speaker 1: is anybody out there drilling to find the motherload? Well?

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Speaker 1: Exploration has uh, you know, essentially collapsed. Uh. And most

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Speaker 1: of the exploration activity that we're seeing in thirteen and

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Speaker 1: fourteen was in the deep and the altar deep water.

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Speaker 1: We're seeing a lot less of that activity. That's the

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Speaker 1: concern I was in Brazil in late March, and they're

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Speaker 1: very worried that the shine has gone off their coin

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Speaker 1: and they may not be able to get the international

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Speaker 1: attention back even in a recovered environment. Interesting, Uh, nobody's

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Speaker 1: putting money into it anywhere. They're cutting back so much

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Speaker 1: at this point that um in a in a way,

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Speaker 1: it doesn't just take the pressure off the end of

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Speaker 1: oil story and the and the shift over to you

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Speaker 1: alternative energy. Well, you know, with lower oil prices in

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Speaker 1: the last year, I mean you really saw it in

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Speaker 1: the hybrid market in the US, where you know, hybrid

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Speaker 1: auto sales dropped off dramatically because you know, gasoline prices

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Speaker 1: had fallen a dollar a gallon. And it's certainly harder

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Speaker 1: for alternative energy to compete in a forty dollar world

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Speaker 1: versus a hundred dollar world. But as long as they

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Speaker 1: keep making technological innovations, then their their competitiveness improved. So

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Speaker 1: they're part of the mix. There'll be a rowing part

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Speaker 1: of the mix. The question is that is the growth

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Speaker 1: right alternative fuels, not whether or not they exist in

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Speaker 1: the mix. We're gonna rip out the script on this

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Speaker 1: day of politics. I want to talk to you about

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Speaker 1: skip Yorks Texas as well. Skip work with us with

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Speaker 1: the Woods because he's in our New York studios. It's

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Speaker 1: also Star Wars Day fourth, be with you. You don't

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Speaker 1: know that, Michael barn knows. Everybody knows that. I'm sorry, Michael,

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Speaker 1: you were here. Yeah, I do know what My wife

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Speaker 1: maybe watching, who does not get on the break. You

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Speaker 1: can let me know, Michael barr what the hell was

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Speaker 1: going on? Their future is negative fifteen now negative fourteen down,

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Speaker 1: futures negative, the tenure yield just under one zero percent,

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Speaker 1: oil at eighty three per barrel. All right, that's with

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Speaker 1: Michael Barnet the latest World in National headline, my time,

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Speaker 1: Thank you very much. It's all but certain now that

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Speaker 1: Donald Trump and Hillary Clinton will be facing each other

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Speaker 1: in the presidential election in November. Trump one yesterday's Indiana primary,

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Speaker 1: prompting Trump's main rival Ted Cruz to drop out of

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Speaker 1: the race. Democrat Bernie Sanders when yesterday in Indiana but

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Speaker 1: as far behind Clinton in the delegate account for the domination.

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Speaker 1: President Obama will visit Flint, Michigan today, the city that

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Speaker 1: is under a water contamination crisis. New York Governor Andrew Cuomo,

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Speaker 1: says former Assembly speaker. Sheldon Silver's twelve year prison sentence

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Speaker 1: in a five million dollar corruption case sends a message

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Speaker 1: to that officials who abuse the public trust will be

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Speaker 1: held accountable. Silver also was ordered to fourfeit five point

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Speaker 1: three million dollars and pay at one point seventy five

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Speaker 1: million dollar five Global News twenty four hours a day,

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Speaker 1: powered by our twenty four hundred journalists. Michael Barre, Mike

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Speaker 1: Tom very Good is on this May fourth is the

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Speaker 1: fourth is with us. We say our slogan sils your

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Speaker 1: to Elbow Beach Bermuda dot com for more details. Gloobal

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Speaker 1: Business News twenty four hours a day at Bloomberg dot com,

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Speaker 1: the radio plus mobile lap and on your radio. This

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

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Speaker 1: update is brought to you by National Realty Returns on

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Speaker 1: cash and rented real Estate. Find them at n r I,

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Speaker 1: a dot net time Warner posting first quarter earnings that

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Speaker 1: beat Anilos estimates. Is higher ratings at the news network

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Speaker 1: led to a surge and advertising sales. Priceline dot com

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Speaker 1: also beat. Futures are lower this morning smp EMNY futures

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Speaker 1: down twelve and a half points and now eveny futures

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Speaker 1: down eighty nine. Nastacumny futures down thirty backs. In Germany's

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Speaker 1: down eight tenths per cent. The ten year treasury that

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Speaker 1: will change yield one point seven nine percent. Nine makes

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Speaker 1: Sprude oil a half per cent or twenty one cents

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Speaker 1: to forty eighties six of barrel called Mike School down

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Speaker 1: one point one percent or thirteen dollars eighty cents to

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Speaker 1: twelve seventy eight. Announced the Euro and dollar fourteen ninety

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Speaker 1: three again one oh six point seven three. That's a

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Speaker 1: Bloomberg business flash, Tom and Mike, very good, Karen, thank

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Speaker 1: you so much. Skip York with us holding court in

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Speaker 1: the tenth floor at five eight four seven, sent flea,

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Speaker 1: Did I pronounced it correctly? Scrupully sinfully? Houston, Texas seven

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Speaker 1: seven zero five seven What is the state of the

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Speaker 1: great State of Texas? I mean we have all of

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Speaker 1: our stereotypes smash them for us, what is the state

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Speaker 1: of Texas? I think the state of Texas it's healthier

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Speaker 1: than UM then it's ever been in any other price correction.

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Speaker 1: I think the state and in Houston in particular, learned

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Speaker 1: the lesson in nineteen eight six and diversified itself. So

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Speaker 1: you know, the the estimate is that UM Texas has

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Speaker 1: lost seventy thousand oil uh jobs in the last year,

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Speaker 1: but it's growing jobs in the other part of the sector.

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Speaker 1: So the mood in Houston is it's somber. It took

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Speaker 1: a while for it to get there. But there's also

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Speaker 1: a view that it's not the end of day. Well

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Speaker 1: is there you're in the business. Is there a feeling

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Speaker 1: that we have seen most of the job cuts from

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Speaker 1: all these companies that we're going to see or is

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Speaker 1: there another big round coming. I think the feeling is

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Speaker 1: is that the worst is past us where but it's

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Speaker 1: it's a we're in a flat spot, so probably don't

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Speaker 1: see a lot more job cuts cutting, but we also

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Speaker 1: don't see jobs being at it. That's kind of the

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Speaker 1: mood in the in in the Michael, I bring this

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Speaker 1: up because lower for longer is the phrase, Texas is

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Speaker 1: not a lower for longer state. No, they want to

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Speaker 1: get up and get going. Uh. The other thing that

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Speaker 1: I've heard is the oil price you're going back up

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Speaker 1: as you mad, and we're gonna open some of them

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Speaker 1: wells that are there. But there was some coming to

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Speaker 1: the effect that the companies that want to do that

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Speaker 1: are gonna have trouble finding workers because, much the same

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Speaker 1: as the construction industry discovered after the collapse of the

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Speaker 1: housing market, all the people who get laid off go

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Speaker 1: on and find other jobs and aren't willing to come back. Yeah.

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Speaker 1: I was in Oklahoma City a few months ago and

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Speaker 1: one of the executive one of the CEOs of one

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Speaker 1: of the independents said the worst thing for the oil

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Speaker 1: industry right now is five percent unemployment. And what he

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Speaker 1: meant by that was that people go off and find

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Speaker 1: other jobs. And they had these great anecdotes of keeping

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Speaker 1: track of some of the better rig crew managers and

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Speaker 1: captains and calling off and just kind of saying how

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Speaker 1: are things going, and having them increasingly say stopped calling

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Speaker 1: because I found a job in Beaumont, Texas working in

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Speaker 1: a petrochemical plant, or I'm now a welder and uh,

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Speaker 1: this other spot, and I'm just not going back to

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Speaker 1: the volatility of the patch. So you know, thanks for

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Speaker 1: thanks for checking, but stop checking. We were when we

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Speaker 1: used to read four This is long ago when big

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Speaker 1: companies had printed annual reports. Some of you may remember

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Speaker 1: actually reading an x on Or Mobile annual, a Texaco

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Speaker 1: annual report. Um. When I look Skip York at the

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Speaker 1: price that they assume, how has Big Oils price changed

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Speaker 1: after this tobacco? Yeah? I think Big Oil was one

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Speaker 1: of the one of the sectors in the up stream

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Speaker 1: that never really kind of enthusiasm. It never went agree.

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Speaker 1: I think they never thought it was hundred dollars per

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Speaker 1: aver um. But I think what they did do is

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Speaker 1: they were on programs where drilling or development programs where

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Speaker 1: they needed about seventy dollars a barrel to break even

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Speaker 1: on cash flow um, which is, you know, far away

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Speaker 1: from a hundred dollars barrel. They're now pairing themselves back

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Speaker 1: when we think they're now down into the low fit. Okay,

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Speaker 1: but this morning it's some tower in Houston or wherever

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Speaker 1: they're modeling two thousand twenty. Are they even holding the meeting? Uh? Well,

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Speaker 1: they they are holding meeting they have to hold the meeting. Right.

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Speaker 1: If you're somebody like an x on or a shell, Uh,

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Speaker 1: tight oil isn't a big part of your portfolio. Might

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Speaker 1: be the growth part of the portfolio, but your portfolio

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Speaker 1: is still driven by these longer lead projects and you've

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Speaker 1: got to be figuring out I mean what in the

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Speaker 1: fall late late last year, we sat with a number

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Speaker 1: of planning groups that said, you know, we've got to

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Speaker 1: be We've got projects that we know we need to

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Speaker 1: sanction right now. What we're looking for is the price

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Speaker 1: signal that tells us that three to five years out

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Speaker 1: it's the right decision to make it now. And so

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Speaker 1: they are having those meetings. What they're trying to figure

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Speaker 1: out is, you know, it's not the whereas the price

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Speaker 1: of oil today, but it's trying to figure out what

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Speaker 1: that trajectory is and then when do they time their

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Speaker 1: sanctioning decision to match that trajectory. Well, let me ask

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Speaker 1: you this, this is a problem the Gulf States went

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Speaker 1: through thirty forty years ago. Uh, what is what should

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Speaker 1: the price be? They answered it by forming a cartel

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Speaker 1: OPEC and set a price. What's likely to happen in

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Speaker 1: the United States when we have this ongoing issue of

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Speaker 1: you know, the price goes up and then everybody jumps in,

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Speaker 1: and then we get too much inventory, and then the

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Speaker 1: price goes down and you get this volatility. Is it

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Speaker 1: gonna work itself out where people generally agree on a

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Speaker 1: stable price or we're gonna see volatility for years? I think,

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Speaker 1: you know, tight oil might be the the new driver

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Speaker 1: of volatility. And what what you could see what could

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Speaker 1: be stabilizing or what could strip volatility out of that

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Speaker 1: tidal oil response? Is you know, as the majors add

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Speaker 1: more tight oil to their portfolios, which they do want

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Speaker 1: to do, they will drill it as a portfolio, not

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Speaker 1: on a well by well basis, So as they become

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Speaker 1: a bigger part of the tight oil footprint, you may

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Speaker 1: not see as dramatic a reaction in tight oil to

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Speaker 1: a change in the oil price then you would have

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Speaker 1: seen if it was just the independence that we're in,

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Speaker 1: that that space of the upstream where's is oilty here?

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Speaker 1: It's totally irresponsible question, but I'll go with it this morning.

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Speaker 1: Where's oil in a year? Does Wood mackenzie have a view,

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Speaker 1: like Ed Moore says, of you, we have a view

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Speaker 1: that you know from here, we we sort of think

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Speaker 1: we're gonna range trade in the in the mid forties

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Speaker 1: through most of this year. If we go out to

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Speaker 1: the end of twenty seventeen, we think we're in the

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Speaker 1: you know, the upper six fifties, low sixties. It's this

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Speaker 1: is going to be a long, slow slog and this

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Speaker 1: is the longer part of lower for longer. Skip York,

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Speaker 1: Thank you so much. Always interesting. I come away smarter

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Speaker 1: when Mr. York darkens the door here every day, because

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Speaker 1: otherwise we're in Yeah, what's mackenzie future smarter? We got, Well,

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Speaker 1: what we got is a smarter tape. Things are better

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Speaker 1: negative fifteen. We're not up to negative thirteen. What an

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Speaker 1: ugly over there, but what an ugly hour and a

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Speaker 1: half from like five amsh in a hundred negative hundreds yeah,

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Speaker 1: seven four this morning. Uh. And improvement to the tape

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Speaker 1: is about what we can tell you. Stay with us.

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Speaker 1: Almost interesting productive morning. Bloomberg surveillance. We're coming up. We'll

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Speaker 1: find out what CEOs think of the economy ahead, which

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Speaker 1: lets are from Boston consulting Group on the views of

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Speaker 1: the people who make the investment decisions.