WEBVTT - Logic's O'Neill: Global Oil Demand is Underestimated (Audio)

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<v Speaker 1>This is a Broomberg Business Flash from Bloomberg World Headquarters.

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<v Speaker 1>I'm Charlie. Plot a mixed picture for stocks on this

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<v Speaker 1>drop of three tenths of one percent, and we've gotten

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<v Speaker 1>the ounce now down two point two percent to twelve

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<v Speaker 1>sixty five. Crude oil down two and a half percent

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<v Speaker 1>forty three fifty four for a barrel of West Texas Intermediate,

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<v Speaker 1>a drop there of a dollar twelve So recapping a

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<v Speaker 1>mixed picture for stocks. The SMPI Index higher by a point,

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<v Speaker 1>a gain of less than point one percent. I'm Charlie Palaton.

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<v Speaker 1>That's a Bloomberg business flash. This is taking stock with

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<v Speaker 1>Gatlin Hays and Pim Box on Bloomberg Radio. This is

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<v Speaker 1>taking stock on Bloomberg. I'm pim Fox. Oil. Oil prices

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<v Speaker 1>down today about two and a half percent. New head

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<v Speaker 1>of the Energy Ministry, the oil ministry in Saudi Arabia,

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<v Speaker 1>wildfires in Western Canada, and conflict in Libya. Let's bring

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<v Speaker 1>in Bill O'Neill, founder Partner Logic Advisors and expert when

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<v Speaker 1>it comes to oil. Bill O'Neill, thank you very much

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<v Speaker 1>for being with us. Can you just describe the US

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<v Speaker 1>business first? Because I was reading your note and you

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<v Speaker 1>talked about in bold face this decline in the total

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<v Speaker 1>number of oil rays and I want to get too

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<v Speaker 1>technical too quickly, but just to decribe what's going on

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<v Speaker 1>in the United States for people. Well, we've we've seen

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<v Speaker 1>an absolutely beyond dramatic decline in the number of oil rigs.

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<v Speaker 1>But the interesting thing to him is that there has

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<v Speaker 1>been so much efficiency created and they knocked out so

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<v Speaker 1>many of the inefficient minds. The US output, yes, it's

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<v Speaker 1>down and will continue to go down, but it has

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<v Speaker 1>declined at a much slower rate than if you look

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<v Speaker 1>at just those absolute rig numbers would suggest so, um,

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<v Speaker 1>we're seeing lower US production, but not dramatic. We will

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<v Speaker 1>see some further production declines and it will help at

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<v Speaker 1>least off set some of the increases we're seeing, for

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<v Speaker 1>example from from Iran and the continued avaricious production that

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<v Speaker 1>we get from the slities. You mentioned avaricious production. Expand

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<v Speaker 1>a little bit on that and maybe take us into

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<v Speaker 1>this change at the top of the oil industry in

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<v Speaker 1>Saudi Arabia. Well, it's very interesting in a sense, it's

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<v Speaker 1>not a total supply surprise. Rather, we we had expected

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<v Speaker 1>that Ali Alimi, who has been there seems like forever,

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<v Speaker 1>would be replaced. Um. The new UM minister is the

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<v Speaker 1>former head of a RAMCO. And keep in mind in

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<v Speaker 1>the background that the Saudis are looking to sell off

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<v Speaker 1>at least a portion of a RAMCO, So I think

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<v Speaker 1>that's part of it. UM. Also, they wanted someone new

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<v Speaker 1>with some fresh ideas. The new UH minister, his name

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<v Speaker 1>is Khalid our Faith, is thought to be a bit

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<v Speaker 1>even more hawkish than Naimi was as concerned sauty production.

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<v Speaker 1>So what do you mean he wants to keep that

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<v Speaker 1>market share. I mean that's what the Saudis have been doing.

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<v Speaker 1>They've been doing everything possible to knock out the shale

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<v Speaker 1>producers in the US, with as we just pointed out,

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<v Speaker 1>some modest success. UH. He probably will be even more so. Also,

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<v Speaker 1>I think he will be less likely to participate in

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<v Speaker 1>the oil freeze talks that are coming up in early June.

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<v Speaker 1>They had that first round that failed, uh Mr Alphae.

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<v Speaker 1>This uh appointment appears to be embarished for that as well.

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<v Speaker 1>So I don't see anything really constructive short term now.

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<v Speaker 1>Longer term, I think the Sorties will want to get

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<v Speaker 1>the price of oil higher when they go into actually

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<v Speaker 1>selling UH Ramco. But for the near term they want

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<v Speaker 1>to keep a firm hand, and that's gonna put a lid,

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<v Speaker 1>if you will, on oil prices. Update us on Saudi

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<v Speaker 1>Aramco and the plan to sell five PC. I'm sorry,

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<v Speaker 1>I said again, just update us on the Aramco. The

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<v Speaker 1>potential for a Ramco to sell five to the market, Well,

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<v Speaker 1>it's there. They're looking to do it. I don't see

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<v Speaker 1>it anytime soon though, but it's going to be something

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<v Speaker 1>that will gradually be phased in. UH. It's a very

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<v Speaker 1>difficult thing to do given the Saudi Arabia looking to

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<v Speaker 1>sell uh something, but it's gonna happen, I don't. I

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<v Speaker 1>don't expect it to happen the short term. I think

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<v Speaker 1>the focus is still going to be more on the

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<v Speaker 1>supplied demand equations as far as a suities are concerned.

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<v Speaker 1>What is the supplied demand equation right now? Supply versus demand? Well,

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<v Speaker 1>if you look at absolute supply demand, there's still considerable

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<v Speaker 1>excess of of oil production is outstripping consumption. Now I

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<v Speaker 1>do see some evidence. For example, today we've had some

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<v Speaker 1>great figures out of China. While they're trade data in

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<v Speaker 1>general was horrible, Uh, they increased their oil imports so

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<v Speaker 1>that was a plus um and China appears to be

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<v Speaker 1>doing some stockpiling as opposed to buying because of need,

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<v Speaker 1>so we're seeing a little bit of that. So that's

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<v Speaker 1>been supportive going forward. I think that may have run

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<v Speaker 1>its course for a while, so that might not be

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<v Speaker 1>as supportive. So I think sup I will continue to

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<v Speaker 1>weigh on the market. I do think though the global

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<v Speaker 1>demand is underestimated by the consensus, and that's going to

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<v Speaker 1>keep prices a little bit steady. So we were lucky enough.

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<v Speaker 1>I guess you could say back in January right in

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<v Speaker 1>our Daily Logic Advisors comment that we thought oil had bottomed.

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<v Speaker 1>No reason to change that view at this point, though,

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<v Speaker 1>I would not be chasing the market. I think there

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<v Speaker 1>are a few short term negatives as far as supply

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<v Speaker 1>is concerned. Um, that could potentially because a little bit

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<v Speaker 1>of a sell off. Also, the funds have gotten quite

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<v Speaker 1>long here, so we could see a little bit of

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<v Speaker 1>books square and come into the market as well, so

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<v Speaker 1>people taking profits. Exactly last point to talking about natural gas.

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<v Speaker 1>Natural gas, you talk talk about over supply markets, that's

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<v Speaker 1>a that's a well over soul market. Demand is is decent, uh,

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<v Speaker 1>but it's it's not that much above average that we

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<v Speaker 1>could expect anything. That's another market. I think it's probably

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<v Speaker 1>discounted the worst of the news, but I think the

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<v Speaker 1>spot demanding question there is far more negative than it

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<v Speaker 1>isn't in oil. So I doubt that we're going to

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<v Speaker 1>see any significant upside move there. Good news for the

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<v Speaker 1>consumer actually should be down the line, you know, regular gasoline,

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<v Speaker 1>that that that the pump has gone up, but I

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<v Speaker 1>don't think it's gonna rock it up considerably from current level.

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<v Speaker 1>So I think, uh, the consumer is going to be

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<v Speaker 1>in pretty good shape as far as energy is concerned.

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<v Speaker 1>Will be a little bit of dinnertism. You at economy,

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<v Speaker 1>Bill O'Neill, founder Partner Logic Advisors. That's very much for

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<v Speaker 1>joining us. You're listening to taking Stock on Bloomberg Radio

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