tv The David Rubenstein Show Peer to Peer Conversations Bloomberg March 30, 2019 2:00pm-2:30pm EDT
>> houston we have a problem. those in the gold coast must be running out of oil. the aftermath of the worst chemical disaster and over a year. oils crude reality, halliburton noted technical problems slowing the shale boom. it's parent-child dilemma. ♪ >> i'm alix steel and welcome to bloomberg commodities edge. with the smartest voices in the
business. first we kick it off a spot on. it's our take on the big story. joining me is ashley peterson, and our spotlight is on oil. >> if anything, oil demand in the u.s. has moved above the previous peak levels. we look at oil demand, even in europe, it is hanging in there. if i look at the world through the lens of a commodities man, it doesn't look bad. oil can get into the 75 range. alix: president trump, not liking it. he treated this week that it is very important that opec increases the prices of oil getting too high. ashley, which one is right? jeff are president trump? ashley: a middle ground. we are a little bit closer to the jeff side of the forecast, around the $75 a barrel range. the problem for trump is he
tweeted this before and opec responded, range -- raise their production and then there were waivers well above what they expected. we are coming up on the may deadline for waivers again. opec will not act until they know the white house will do. alix: that's why this will be range bound. all the major oil traders met this week. they said the same thing. any between 60-80. maybe around 70. gently bullish. where are the stabilizers? ashley: if i may trading house, i will give a broad range in front of all of the other trading houses. i think that $75 a barrel makes more sense. we have to get some actual conclusions on these iran waivers. what is going on with venezuela? if they can keep the lights on long enough to get the crude offshore, where will it go? that's a big question. alix: we have four or five more weeks until president trump has to decide whether or not he's going to grant certain countries with waivers so they can import a raining crude.
what is the designing -- deciding factor? alix: how he feels about the rest of policy and whether that it was to win recently. the waivers are pretty standard. they are lower than the waivers granted during the obama administration and number and volume. the company that the same and claim victory. if he wants to look like he is taking a harder stance, he could also insist that some of the european countries cut their imports even more. we are dealing with an issue as well where several countries, such as india, have come out and say the government shutdowns have slow down the negotiations area even these guys have said we are a few weeks behind in negotiating with the white house. it will be a last-minute decision. alix: in lieu of that, will it be the geopolitics driving the price? will it be the macro looking at the dollar and yield and risk on, risk off? ashley: it will be u.s. apply
and macro. how people wake up feeling about the global economy and demand. it feels like we have had some stability. people are confident moving forward. some of those economic indicators are flashing on the right side though. u.s. supply is in line with our forecast. it has them -- has not been growing gangbusters. there's been a lot of capital discipline and counts are down. that will support prices for the next two weeks. alix: shale production, the forecasts are huge. you had halliburton and some others at the conference is weak warning about technical difficulties. that will slow the rate of growth. is the market prepped for that cap of slowing growth? -- the type of slowing growth? ashley: i have so. they've been drumming this drum for a while now. these producers were in hydrated areas, now they're exploring lower value assets. the running into technical difficulties.
they are facing a large maintenance mountain in terms of declined rates of the new wells. they will need to take that into account. capital discipline. people don't want to keep pumping money into these companies with no return. the ceos have all acknowledged that. we've been saying for a while that slowing growth this year is certain. alix: great to catch up with you. ashley peterson of stratus advisors. coming up, brazilian or minor vale, announcing production declines. a first look at the failing dam collapse that killed 300 people two months ago. as we had to break, floods on the mississippi delta to the dakotas. inundated roads and submerged fields at miss fletcher -- as midwestern farmers prepare for farming season. this is bloomberg. ♪
alix: i'm alix steel. this is bloomberg commodities edge. time now for the data day. we will delve into the market trends of the week. the oil inventory numbers were pretty much bearish across the board. overall stocks rising by 2.8 million barrels a day. a pretty big build in pad three. lower exports, imports, plus less refinery utilization. china is filling up on u.s. imports. the world's second -- the second largest economy made by a record amount this year of 300,000 tons. think of it as a care to resolve trade issues between the u.s. and china. check out this chart. cheap natural gas. so cheap, producers will pay you to think about their hands. it dropped to -$1.50.
that's an all-time low. traders and workers need to get paid until they can take the gas. i want to dig deeper into the 2019 guidance from vale. it's brazil's iron ore producer, when production has crippled from a disaster. the company says it can lose between 50-75,000,000 tons of iron ore this year. joining me now is peter bullard from our rio bureau. the learned from the cup is weak, how bad can he get for them? peter: they are not optimistic on restoring lost output that has been shot as a response of safety concerns after the dam disaster. they had 93 million tons shut in. there is one large mind that they are optimistic about getting. -- getting up and running this year, that the company feels can be operated safely. the iron ore market should get
used to this huge hole that was left by vale. alix: bloomberg interviewed rio tinto's ceo and asked what they would do about that supply gap for iron ore. here's what he had to say. >> they are doing low-grade, so the market is responding. short-term, not moving a big way. we will look at different options. alix: give us some perspective of how tight the market is. players like rio short-term will not try to up their iron ore production. peter: vale, on a call today, they said that in asia, the actual fiscal impacts of the lower supplies coming out of brazil will only be felt about now. because of the long my time getting the shipments to asia. up until now, the price impact has been largely psychological. i think we can expect more
tightness going forward. alix: we party seen such a huge rally in prices. we have any clarity and when and how they will be able to restart production for them? peter: no. the company did not offer much guidance on that. they have a group of minds that have been shot -- mines that hav e been shut, and they're hoping that one of these will be brought up by the end of the year and the full impact on sales in the most positive scenario would only be about 50 million tons. they are leaning toward a more negative scenario. alix: what about the cost impact? they had six write-downs, any impact on the cost yet? peter: they said they will not be firing employees. they will lower production with similar costs. they will be heard by the lack of production. keep in mind that vale, being such a huge producer of iron ore, they benefit by higher prices.
even though they are producing less, they are being compensated by the higher prices resulting from their own shutdowns. alix: good point. peter bullard, thank you. i want to get in the rain. is the worst regional chemical disaster in 14 years. 11 days after the intercontinental terminals chemical tanks erupted in flames and panic spread across houston, the ceo apologized. >> let me begin my remarks by expressing my apology and the collective apology of everyone at ipc for the impact caused by the terminal fire. alix: with us now from houston is mike jeffers, who is following this story. mike, what can get in and out of the houston channel and what cannot? mike: we have tracked only one crude antker -- tanker, that was yesterday. a three-day delay.
right now, there are probably seven or eight crude tankers waiting to get in. getting out is the first priority for the coast guard. as of yesterday, the ship channel was 35% open. they want to get ships out so they can make way for inbound traffic. alix: what is the knock on effect of that? if you do have ships going through the channel, one of the restrictions that would not have been there before the fiery echo -- before the fire? mike: the ships have to stop and go through a contamination checkpoint before they can leave the channel. until those ships are coming through the channel clean, there it -- they are going to continue to delay. the last briefing from the company was this morning, and they cannot give us an estimated time. alix: there are four main
refiners affected by this. they have about 850,000 barrels a day that they move. today have enough crude? -- do they have enough crude? mike: the short answer is no. there have been reports of refiners cutting runs. most of them won't confirm that. like i said, we heavily tracked one tanker that is gotten in so far. that was late last night. they confirm of the record that they have tanker logistical issues, others have been quiet. chances are we will see some reduced production. it will be reflected in next week's inventory report. alix: usually, refiners one of having stockpiles on hand. how many days of covered today have? -- cover do they have? mike: about three days.
they can also run crude they have access to to the pipeline. not all crude is the same. that's the problem. the crew that comes to the pipeline is light, produced in texas. those refiners are mostly optimize for heavy crude. they need to import from mexico or other places. that's what the problem is. alix: that will short supply as well. thank you, mike jeffers. time now for the note of the week. it comes to us from eric lee at city. he says from the perspective of the crude producers, they are not only lost volumes and market share, but they will also get a hit to their price. they overall see the middle east may lose between seven and $37 billion in annual revenue, because it means less demand for their heavy crude. coming up, len got, the ceo of duke energy tells us how their company is preparing for the impact of climate change. we discussed that on bloomberg: commodities edge.
alix: i'm alix steel is bloomberg commodities edge. time now for the brief, which gives in-depth analysis on emerging technologies. bloomberg benioff wrapped up its summit this week and a lecture vacation was a key discussion. we want to take a closer look at meritor, one company betting big on technology.
>> meritor wants to drive into the future with electrification. the company makes vehicle parts for things like trailers, trucks, and fire engines. things like axles, gears and breaks. they operate around the world with north america making up 60% of the revenue and its top customers are companies like daimler and navistar. meritor is in the middle of a transition. first it was about deleveraging. next it was about driving bottom-line earnings. now it is about better margins and free cash flow. then, it will be about electrification. the company expects battery electric vehicles to top 300,000 globally by 2025. to capitalize on this, they announced 22 electrocution programs with car companies who put 130 medium and heavy-duty ev commercial trucks on the road in the next two years. it integrates an electric motor into the axle, which frees up space for batteries and other
components. in the first half of this year, customers will be operating medium duty pickup and trucks with their system. the return on invested capital could take a long time. the company's long-term strategic plan says it is worth it. alix: another hot topic of the conference was climate change. san francisco fed, and a recent paper said the climate related financial risks could the desk and affect the economy -- could affect the economy. infrastructure damage, losses, and commodity prices spiking. joining me now is steph munro, steph, great to see you. what was your best takeaway?
>> a lot of chatter about the carbonization, expanding decarbonization into new sectors. alix: what does that mean? alix:>> decarbonization is the route to controlling carbon. we saw talk about decolonizing industrial heat. fleet decarbonization through light waiting or electrocution. alix: one of the most prevalent ways that the industry thinks can move forward quicker and one of the ways of technology that having caught up? steph: light waiting is a point of discussion for both sides. the fact that you can lightweight vehicles, you can reduce the carbon emissions along with benefiting their emission see. -- efficiency. alix: what is behind it? what techniques and things are people trying to catch up with? steph: we're talking about new chemicals used to create composite materials that go into these vehicles. we're talking about new technologies that cut the omissions from heating sources and make it more efficient and cost effective. and also contribute less carbon. alix: i was struck by the oil companies that were there and talking about their new energy platforms.
did you get the sense that the companies are trying to shrink their own carbon footprint, are also companies that are producers of power, electricity, oil and gas, can make what they produce cleaner? steph: it's all the things he mentioned, but in addition, they're looking for the best economies and are looking to improve their cost. these type of low carbon technologies are the lowest cost energy generating technologies for most parts of the country. alix: thanks for a much. stefan row of bloomberg nef. one solution on climate changes who climbs for it that ? i said down with lynn good, duke energy ceo, whose operations were affected by three hurricanes last year. i asked her but the longer-term impacts. lynn: we continue to invest in our grade for hardening and resiliency. having a response when a hurricane hits to get power back as quickly as possible.
that adaptation is going to be important as we continue to work through the weather events that come in the future. alix: what about technical things like more polls or seawalls or sensors? is that something you have to invest in? lynn good, duke energy ceo adaptation -- lynn: adaptation is a key part of that. targeted under grounding. sensors, self-healing techniques, which isolate the outages. concrete poles. things that can withstand more hurricane force winds. moving substations and transformers away from floodplains are areas that have turned a different planes. -- turned into floodplains. we think about the investment plan we have forward in the carolinas in florida. it's directed at hardening the resiliency. alix: part of the grant, part of it -- bread, -- grid, is build power lines into the ground.
or have more regional power grids. what is it look like? -- what does it look like echo lynn: it will be some of all of those things. there's not one silver bullet. targeting underground makes a lot of sense in areas that are vulnerable. we also think that investment for hardening and resiliency, moving away from floodplains, putting up structures that are more able to withstand hurricane force winds. it will be a little bit of all of those things. it was interesting, during hurricane florence, we had in front of us what had happened from hurricane matthew. which areas were vulnerable, will what should we expect? we included all that and our response and developing hardening plans. alix: how do you change your croc -- cost structure? lynn: good investment is the first thing out of .2. -- grid investment is the first thing i would point to. cyber and physical security, enabling more renewables and customer experience. making that grade the center of the in investment strategy -- the investment tragedy to address climate change. i see that as a multiyear investment strategy. if a hurricane hits, there is a lot of work we do with logistics and response and communications and dealing with our customers to help them through that issue to get power back as quickly as possible. alix: the money on the cost profile, how do you manage it? lynn: the cost profile for hurricane response, was a challenge in 2018. we spent about $1 billion on hurricane response in 2018. we will look for ways to spread
managing impact on customers is front and center. alix: how much you estimate you will spend on response for climate change in 2019? is it also hardening the grid and other preventative measures? lynn: it's all in our capital plan. we don't budget any given year for anything other than ordinary storm experiences. until we start seeing what hurricanes might look like, we don't have that in our plan. we will adjust. that's where balance sheet capacity and liquidity becomes important. alix: a good interview with lynn good, duke energy ceo. traders right now, going hog wild. the june lean hog contract, and measure of volatility the highest since 1986. african swine fever is ravaging china's hog herd. it's leading to panic buying, making this but -- the space anything but boaring. california wildfire emissions as well on friday.
>> new york city for audience worldwide, on jonathan ferro. bloomberg real yield starts right now. ? johnathan: coming up, wrapping up the global fixed income, for government bonds in credit. with junk debt in the u.s. delivering its best quarterly gain since 2009, even as the market continues to price in doom and gloom elsewhere. looking for a rate cut. we begin with the big issue. despite all the tension, it has been a buyer within the global bond rally. >> right now, i think everything looks great in bonds. equities and bonds are going up. >> i think it's magnificent.