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Kilduff on Oil Markets (Audio) · Bloomberg Intelligence

• 0:00
  Speaker 1: You're listening to taking stock with pim Box at Kathleen
• 0:04
  Speaker 1: Hayes on Bloomberg Radio. Oil prices posting a third weekly
• 0:10
  Speaker 1: gain as the potential for a production freeze deal among
• 0:13
  Speaker 1: major producers outweighing concerns about ample inventor is here to
• 0:18
  Speaker 1: tell us more? John Kilda, founding partner of Again Capital.
• 0:22
  Speaker 1: All right, John, great to have you with us. Are
• 0:25
  Speaker 1: we going to see oil prices continue to move higher?
• 0:29
  Speaker 1: I think in the short run we will go a
• 0:30
  Speaker 1: bit higher. Pim that the market got caught short in
• 0:34
  Speaker 1: the face of some comments by the new Saudi oil minister.
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  Speaker 1: Uh and the short covering is is underway with with
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  Speaker 1: abandon right now, so I think we still have some
• 0:44
  Speaker 1: more to go before we can head back lower again.
• 0:46
  Speaker 1: All right, what is going to cause the lower prices
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  Speaker 1: after this short covering? Well, again, you know that the
• 0:54
  Speaker 1: market got to a record short position. So whenever the
• 0:57
  Speaker 1: book gets floated to one side, I like to say
• 1:00
  Speaker 1: it has to revert um. But I think as long
• 1:02
  Speaker 1: as put the price rally fails at fifty or fifty two,
• 1:05
  Speaker 1: we'll go back down. The reason we're going to go
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  Speaker 1: back down is because for all the talk of a freeze,
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  Speaker 1: and all the talk of cooperation among OPEC, Russia and
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  Speaker 1: maybe some other countries, there's just keeps seeing more and
• 1:15
  Speaker 1: more oil coming to the market. The Saudis are at
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  Speaker 1: a record export level of crudal and refined products. The
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  Speaker 1: Chinese are continuing to ramp up their export of refined products,
• 1:25
  Speaker 1: brush at and all time high. Northern Iraq oil productions
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  Speaker 1: came back online for the first time in months chest today.
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  Speaker 1: Olibians are starting to get their oil after the market
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  Speaker 1: again as well as Nigerians can get their act together.
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  Speaker 1: It's just another wave of oil for this market so
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  Speaker 1: that it has nowhere to go. But then and John
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  Speaker 1: countries such as Venezuela, they're looking to increase or to
• 1:47
  Speaker 1: export more oil because that's a hard currency earner. Absolutely,
• 1:52
  Speaker 1: Pim and you know, and they in Venezuela that you
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  Speaker 1: just mentioned, they certainly are the basket case among the
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  Speaker 1: producers right now. With their economy teetering on imploding completely.
• 2:01
  Speaker 1: Their their oil production actually is somewhat challenged, so that
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  Speaker 1: is something of a supportive feature. And I know you've
• 2:06
  Speaker 1: probably been talking about this all day, but the weakness
• 2:09
  Speaker 1: and the dollar has had a big effect on on
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  Speaker 1: dollar denominated oil prices. As well as that dollar falls,
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  Speaker 1: it props up oil prices, so that too is a
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  Speaker 1: factor right now. What role is Iran playing in the
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  Speaker 1: oil industry? Well interesting, I was at the last meeting,
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  Speaker 1: at the last goal around of this freeze uh nonsense.
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  Speaker 1: I was convincent deal would not come together. I thought
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  Speaker 1: maybe this time that there was a chance for a
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  Speaker 1: deal because the Iranians are pretty much back to their
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  Speaker 1: pre sanctioned output levels in terms of crude oil production.
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  Speaker 1: But they have just said that they probably won't attend
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  Speaker 1: the meeting in Algeria next month where they're hoping to
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  Speaker 1: get this deal cobbled together. And also to their recent
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  Speaker 1: allowance of Russia to use an air base within Iran
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  Speaker 1: to strike Syria is really a stick on the eye
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  Speaker 1: of the facialities once again. So there's no coming together
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  Speaker 1: between those two name uh fat players in OPEX, and
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  Speaker 1: without that there will be no deal. John, you mentioned
• 3:08
  Speaker 1: Nigeria production and I wonder if you could tell us
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  Speaker 1: a little bit about why it is at a twenty
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  Speaker 1: seven year low and what's going to happen next. So
• 3:17
  Speaker 1: where the oil is in Nigeria is in the southern
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  Speaker 1: part of the country. You're on the coastlines called the
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  Speaker 1: Nigeria Delta, and from time to time the indigenous folks
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  Speaker 1: down there raise up rise up in protests and rebel
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  Speaker 1: and bomb and attack the oil infrastructure because they don't
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  Speaker 1: get their their fair share of the pie as they
• 3:34
  Speaker 1: as they see it. The new government that came in
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  Speaker 1: their cut payments to the various groups there, and what
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  Speaker 1: you think would happened happens, and so there's been attacks
• 3:43
  Speaker 1: on the infrastructure and they've been a pretty dedicated bunch
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  Speaker 1: there that has helped not oil output offline, but that
• 3:49
  Speaker 1: the government has reversed course, has begun making payments, their
• 3:53
  Speaker 1: serious negotiations under way so that oil output could rebound
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  Speaker 1: as quickly as it went offline. I like the point
• 4:00
  Speaker 1: now that this is not the Fokohoram and other um
• 4:03
  Speaker 1: sectarian sort of upset that you have in the northern
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  Speaker 1: part of the country. This is strictly all about petro
• 4:09
  Speaker 1: dollars john at a price of around forty eight dollars
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  Speaker 1: a barrel for West Texas and fifty dollars a barrel
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  Speaker 1: for Brent crude, at what point do US producers start
• 4:20
  Speaker 1: pumping more oil? Well, they've done an incredible job. Now
• 4:24
  Speaker 1: over the past, you're driving their costs down. There are
• 4:27
  Speaker 1: a number of areas now where they're profitable at thirty
• 4:29
  Speaker 1: five dollars a barrel. Uh. You might have noticed today
• 4:32
  Speaker 1: that the rig count Bakers use rick Cant was up again,
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  Speaker 1: I think for the fourth straight week. It's fact. I
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  Speaker 1: think they added ten right, they added ten riggs, ten
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  Speaker 1: more riggs. It's up about almost now off it's low
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  Speaker 1: from March, so they've been racing riggs back into service.
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  Speaker 1: And earlier this week it was partly due to an adjustment,
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  Speaker 1: but the e i A told us that US production
• 4:53
  Speaker 1: has jumped the most it has since May, undred and
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  Speaker 1: fifty thousand barrels a day, which is not insignificant. So
• 5:00
  Speaker 1: they're on the comeback trail really as we speak. Just
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  Speaker 1: getting over four dollars of barrel seems to invite it
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  Speaker 1: some hopeful analysis among the sector to get back in,
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  Speaker 1: get back in the ground, and get drilling again. To
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  Speaker 1: give you some numbers for it, uh, the number of
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  Speaker 1: rigs drilling for oil in the United States has climbed
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  Speaker 1: for eight consecutive weeks. It rose about four rigs for
• 5:22
  Speaker 1: the for the week for the first time since February.
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  Speaker 1: This all according to Baker Hughes Uh. John, explain what
• 5:29
  Speaker 1: happens with refiners because they're switching over from gasoline production
• 5:36
  Speaker 1: to h heating oil. Correct, that's correct. And they're also
• 5:41
  Speaker 1: switching over from a summer grade gasoline to winter grade gasoline,
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  Speaker 1: which is easier to make. And then we had an
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  Speaker 1: abundance of that coming out of last winter, which helps
• 5:50
  Speaker 1: get the pump prices really low come February when they
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  Speaker 1: had to switch out. So it's gonna happen now, Tammy.
• 5:56
  Speaker 1: You're going to see the refiners cut their runs, their
• 5:59
  Speaker 1: their their util station rate, and of course that's going
• 6:02
  Speaker 1: to cause crude oil be less in demand back up
• 6:05
  Speaker 1: in the system. And this is why over the course
• 6:07
  Speaker 1: of the next couple of months you could see a
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  Speaker 1: real breakdown again, just as we saw last year, as
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  Speaker 1: the glut just enlarges and gets bigger and bigger and
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  Speaker 1: uh and and really the global market gets swamp again.
• 6:18
  Speaker 1: I want to thank you very much John Kildoff, he
• 6:21
  Speaker 1: is the founding partner of Again Capital, giving us his
• 6:25
  Speaker 1: view on the oil markets with oil posting a third
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  Speaker 1: weekly gained. I want to thank you all for listening
• 6:33
  Speaker 1: to taking Stock. My thanks to our engineer Reggie Basil,
• 6:36
  Speaker 1: our producer Marx and Escalche. I'm pim Fox and this
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  Speaker 1: is Bloomberg.