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Again's Kilduff on OPEC Cut: Oil Still Going Below $40 (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York Bloomberg eleventh to Washington, d C.
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  Speaker 1: Gone is taking stock. I'm Kathleen Hayes along with Pim Fox.
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  Speaker 1: An apparent agreement at Opek to curtail production has been
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  Speaker 1: responded to in markets around the world, not the least
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  Speaker 1: of which because it could mean higher oil prices that
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  Speaker 1: could boost inflation, that could help central banks like the
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  Speaker 1: Bankage of Campan. We're gonna be speaking to John Kilda
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  Speaker 1: from again Capital. Guess we'll be speaking about the price
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  Speaker 1: of oil and what happens next. But right now we
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  Speaker 1: know what happens next. We're going to Charlie Pellett in
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  Speaker 1: the Bloomberg newsroom, and I think very much Pim Fox,
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  Speaker 1: thank you, Kathleen Hayes. Let us begin with crude oil,
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  Speaker 1: because we have got oil at a one month high.
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  Speaker 1: After all, Peck agreed to reduce production for the first
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  Speaker 1: time in eight years, surprising traders a big shock. Yesterday.
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  Speaker 1: They were expecting members to maintain output. Here's where we
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  Speaker 1: stand in terms of crude. West Texas Intermediate up one
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  Speaker 1: two percent right now, up fifty six cents w t
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  Speaker 1: of one percent hard by twenty nine cents of barrel
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  Speaker 1: equities lower twenty eight minutes to go ahead of the close,
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  Speaker 1: the SMP down fifteen, a drop of seven tenths of
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  Speaker 1: one percent, and right now thirty two on Wall Street
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  Speaker 1: to look at the other stories. Thank you, Charlie from
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  Speaker 1: More at eight r dot org recapping equities lower oil higher,
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  Speaker 1: SMP down fourteen A dropped there of seven tenths of
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  Speaker 1: one percent. West Texas Intermediate crude up now by one
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  Speaker 1: point three percent. I'm Charlie Pellett. That's a Bloomberg business flash.
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  Speaker 1: You're listening to taking stock with Kathleen Hay's and Pim
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  Speaker 1: Box on Bloomberg Radio. Oh yes, let's talk about oil
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  Speaker 1: and find out about this new agreement. Will it hold?
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  Speaker 1: Let's find out more from John killed Off he is
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  Speaker 1: founding partner again a capital John, this opeque agreement. Just
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  Speaker 1: explain it to us. Iran doesn't actually have to observe
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  Speaker 1: the new caps well, that the devil is in the
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  Speaker 1: details and we haven't necessarily met the devil yet because
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  Speaker 1: we won't know the quota table until they get together
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  Speaker 1: on November. So there are stories swirling that they'll be
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  Speaker 1: exemptions for Iran, Nigeria and Libya because of the outages
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  Speaker 1: they suffered and because of the Ran sanctions regime that
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  Speaker 1: just getting out of. So um. It looks like the
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  Speaker 1: Saudis are going to have to bear almost fully the
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  Speaker 1: production cut. We don't know if they're going to be
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  Speaker 1: up for that. And also too before they announced their
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  Speaker 1: table of production limits, they're looking to read chat to
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  Speaker 1: an open producers such as Russia, and Russia has just
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  Speaker 1: been going, uh like gangbusters, increasing their production. There was
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  Speaker 1: a great story on the Bloomberg. You guys have been
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  Speaker 1: covering this extremely well. Just last month they raised production
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  Speaker 1: four hundred thousand barrels a month on month. So there's
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  Speaker 1: a lot of work to be done here. Of course,
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  Speaker 1: it was Saudi Arabia a couple of years ago adopted
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  Speaker 1: a policy of just you know, helping to flood the
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  Speaker 1: world with oil. You know, push the price low enough,
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  Speaker 1: you'll you'll push out a lot of the marginal producers,
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  Speaker 1: you know, shell producers in the States, for example. That
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  Speaker 1: worked to an extent, but now fully and of course
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  Speaker 1: some might say it. You know, it was a they
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  Speaker 1: shot themselves in their own foot. Uh do you know
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  Speaker 1: anything about the inner conversations? What's what's the chatter in
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  Speaker 1: in the energy market among oil experts like you about
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  Speaker 1: what Saudi Arabia is thinking? Now, this is a big mistake,
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  Speaker 1: has gone far enough? What? What? What do you think?
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  Speaker 1: This is the strength of the argument that this is
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  Speaker 1: totally blown up in their face. UM and Iran emerging
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  Speaker 1: from this as the strongest player UH in OPEC. UH
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  Speaker 1: sociaty financial position has deteriorated very rapidly to having to
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  Speaker 1: go to market to raise debt and the I p O,
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  Speaker 1: the Saudi Aramco Crown Jewel and they're they're not paying suppliers,
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  Speaker 1: they're they're not giving out raises, they're not giving out bonuses. Uh.
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  Speaker 1: They've hit the end of the road much more quickly
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  Speaker 1: than I think they realized. And I also don't think
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  Speaker 1: they'd be sitting here two and a half years later
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  Speaker 1: when they embarked on this. I think they thought they
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  Speaker 1: were gonna be able to wash out the U S
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  Speaker 1: shale industry much more effectively and also break the back
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  Speaker 1: of others with an OPEC so this has gone really
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  Speaker 1: off the rails for them. It's an embarrassment really and
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  Speaker 1: uh and that the position that I Ran is it
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  Speaker 1: is quite interesting because because of the way they hunker
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  Speaker 1: down to ride out the sanctions, regime set them up
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  Speaker 1: beautifully for these tough times. So their economy is actually
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  Speaker 1: growing four percent, while all the other oil based economies
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  Speaker 1: are in significant contraction. So John Kildeff, I want to
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  Speaker 1: try to understand what's going on behind the scenes here.
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  Speaker 1: Iran will pump more oil and then they'll spend some
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  Speaker 1: of that money to back the Bashar al Assad regime
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  Speaker 1: in Syria, while the Saudis will pump their oil and
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  Speaker 1: they will continue to use that money to support the
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  Speaker 1: rebels who are fighting the bush are Al Assad regime,
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  Speaker 1: and Russia will continue to pump oil and spend that
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  Speaker 1: money fighting the rebels on behalf of the bush are
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  Speaker 1: Al Assad regime. Does that make sense absolutely? It's the
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  Speaker 1: extent you see Russia on the same side of this.
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  Speaker 1: You're not going to get any really hard agreement in
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  Speaker 1: a way now a land has turned the table on
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  Speaker 1: the Saudis and that they're able to keep the price low,
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  Speaker 1: still make money, still cover their budget same with the Russians.
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  Speaker 1: The Russians are now budgeting for four to five dollar oil. Uh,
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  Speaker 1: so they too can can ride this out. And it's
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  Speaker 1: the Saudis who cannot ride this out, who needs a
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  Speaker 1: higher price to really keep things together, and so far
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  Speaker 1: their side of that fight. So they're going to have
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  Speaker 1: the least resources of the salities to help with the rebels.
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  Speaker 1: And so I think that's why you're seeing a very
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  Speaker 1: well timed ratcheting up, unfortunately of the bombing of Aleppo
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  Speaker 1: and other parts of Syria. So what is your forecast
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  Speaker 1: for the price of oil? Now? Where's it going? Well?
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  Speaker 1: I think it's it's still going to go lower. I
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  Speaker 1: think what you've seen here is is the short covering rally.
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  Speaker 1: I think a lot of folks have gotten scared out
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  Speaker 1: because of the at least came to an agreement OPEC
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  Speaker 1: that is, but it's short lives. The fact that we
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  Speaker 1: didn't get over forty eight dollars a barrel today UH
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  Speaker 1: set us up for another technical failure here, So prices
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  Speaker 1: should trend down. I think we go below forty before
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  Speaker 1: we go anywhere else. I don't see the market coming
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  Speaker 1: into balance until late next year. Uh. Particularly with the
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  Speaker 1: increased production that we're going to get from from the
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  Speaker 1: SEC countries we mentioned Russia, O, Libyan, Nigeria, and even
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  Speaker 1: Iraq and Iran for that matter. By the way, the
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  Speaker 1: Iraqis are screaming over the d L are very upset
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  Speaker 1: about it because it looks like they're supposed to take
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  Speaker 1: a big hit on their recent production hike as well. John,
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  Speaker 1: just quickly give you about thirty seconds tell us about
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  Speaker 1: the importance and the change that having the US as
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  Speaker 1: a swing oil producer makes to the market. Well, I
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  Speaker 1: know there's a big debate as to whether or not
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  Speaker 1: we are or can be energy independent. UH was certainly
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  Speaker 1: an energy player. I you know, this has been a miracle. UH.
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  Speaker 1: And the technology and advancements keep coming. They keep sleep
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  Speaker 1: the frackers, the shale players keep reducing their costs of drilling.
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  Speaker 1: They are back in the game, and I think it's
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  Speaker 1: it's an amazing story that's gonna continue to help profitable economy.
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  Speaker 1: John killed us, thank you so very much for joining
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  Speaker 1: us today founding partner of Again Capital. Yes, there seems
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  Speaker 1: to be some kind of deal led by Saudi Arabia
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  Speaker 1: in OPEC to cut back on production. But John says
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  Speaker 1: prices are going to keep falling anyway. I'm Kathleen Hayes
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  Speaker 1: along with pim Fox, and this is Bloomberg. Coming up
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