Latest / Bloomberg Intelligence / AT Kearney's Heinroth: Supply Reserves Will Curtail OPEC(Audio)

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AT Kearney's Heinroth: Supply Reserves Will Curtail OPEC(Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York Bloomberg eleven, Rio to Washington,
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  Speaker 1: Kathleen Hayes, my co host Pim Fox on vacation. This week,
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  Speaker 1: we're gonna be taking a look at oil. The prices
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  Speaker 1: down about forty seven bucks of barrel after being firmly
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  Speaker 1: above fifty bucks for just a few weeks. Will uh
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  Speaker 1: kind of bottlenet caused by oil field services help boost
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  Speaker 1: that oil price again? While our guests coming up on
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  Speaker 1: the show now, Sean Heinrath from a t Kearney in
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  Speaker 1: Houston says, don't count out. He's got a very fascinating explanation.
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  Speaker 1: And we're gonna take a look at the breaking news
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  Speaker 1: in the last half hour. Apple facing a potential tax
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  Speaker 1: bill running into billions of euros as the EU poises
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  Speaker 1: to release of finding into its dealings with Ireland as
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  Speaker 1: soon as tomorrow. Well, we don't have to wait tomorrow
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  Speaker 1: for this Charlie Pelletts in the news room, and he's
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  Speaker 1: got a Bloomberg business flash, and I think of Kathleen Hayes.
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  Speaker 1: Let's begin with Apple shares now trading unchanged one oh
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  Speaker 1: six ninety six on shares of Apple. You were mentioning
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  Speaker 1: crude oil West Texas Intermediate down one and a half percent,
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  Speaker 1: falling seventy cents of barrel on w t I forty
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  Speaker 1: ninety three. Right now, Brent crew down one point one percent,
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  Speaker 1: down fifty six cents thirty seven. Natural gas heading the
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  Speaker 1: other direction, off now by three tenths of one percent
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  Speaker 1: to eighty eight per million bt us on natural gas.
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  Speaker 1: Oil is declining them with doubts that producers will agree
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  Speaker 1: on a deal to stabilize the market when global suppliers
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  Speaker 1: meet next month for informal talks. Jason Schenker is chief
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  Speaker 1: economists at Prestige Economics. He was interviewed this morning on
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  Speaker 1: Bloomberg Television. A town of this is very different than
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  Speaker 1: anything we've seen in a while from OPEC. Uh. You know,
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  Speaker 1: they've had side meetings before, but they haven't been formally announced.
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  Speaker 1: Uh of the press release directly from the OPEC secretariat,
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  Speaker 1: and you've got different members saying they might do this,
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  Speaker 1: they might do this. Uh, you know, and I don't
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  Speaker 1: think personally that they're going to change their production levels,
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  Speaker 1: but the fact that that could be on the table
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  Speaker 1: if prices fall further is something that has stemmed prices.
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  Speaker 1: Here man, we will have more on oil coming up
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  Speaker 1: right here on taking stock. Herbal Life shares trading higher
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  Speaker 1: after billionaire Carly Com bought more than two point three
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  Speaker 1: million shares in the embattled nutrition company that has the
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  Speaker 1: high profile that that is the high profile target of
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  Speaker 1: fellow billionaire activist investor Bill Ackman. Herbal Life up now
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  Speaker 1: by three point nine two thirty two on Wall Street. Now,
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  Speaker 1: let's take a look at other news from around the world.
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  Speaker 1: Thank you, Charlie from the Bloomberg Newsroom. I'm Matt Miller.
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  Speaker 1: we thank you what again recapping The stocks are rallying
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  Speaker 1: with the SMP five hundred index up twelve, a gain
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  Speaker 1: of six tenths of one percent of ten year up seconds,
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  Speaker 1: a Bloomberg business flash. You're listening to taking stock with
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  Speaker 1: bim box at Kathleen Hayes on Bloomberg Radio. Taking stock
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  Speaker 1: of the energy market. We step back. Two big forces
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  Speaker 1: at work of You say a global supply glut uh
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  Speaker 1: that has not been sufficient and reduced. Others say, well,
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  Speaker 1: global demand that keeps rising. Sooner or later that all
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  Speaker 1: price will not on lea surpass fifty bucks of barrowbable
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  Speaker 1: head to sixties seventy even higher. Our next guest is
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  Speaker 1: looking at oil field services. This may be key this
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  Speaker 1: part of the industry to how prices performed. Next, Sean
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  Speaker 1: Heinroth is a principal oil and gas at the consulting
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  Speaker 1: from A. T. Kearney and he's joining us from Houston, Texas,
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  Speaker 1: the heart of US oil country. Shaun, welcome, Hey, thank
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  Speaker 1: you very much. Kathleen, happy to be here. So, UH,
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  Speaker 1: tell us broadly how the oil field services fits into
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  Speaker 1: the industry right now and why it's so important to
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  Speaker 1: your outlook for how quickly oil prices can rise and
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  Speaker 1: how long they can stay at higher levels A couple
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  Speaker 1: of things, Kathleen, I think that the oil field service
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  Speaker 1: industry as a whole is a very complementary piece to
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  Speaker 1: what determines ultimately what we're able to supply UH in
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  Speaker 1: the energy side of the equation. So they work with
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  Speaker 1: operators and provide a lot of the technology and and
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  Speaker 1: frankly just the labor that goes into UH providing the
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  Speaker 1: oil and gas that UH is ultimately consumed in the
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  Speaker 1: petrochemical and refining industries. And so UH they are one
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  Speaker 1: half of that equation in a sense. Okay, And so
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  Speaker 1: what is the state of the oil field services, What's
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  Speaker 1: what's the struggle? Why is this going to be so
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  Speaker 1: important to the outlook for oil I think a couple
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  Speaker 1: of things that have gone on here. As we entered
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  Speaker 1: into late two thousand and fourteen, we had a very
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  Speaker 1: typical oversupply in the industry that we see periodically on
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  Speaker 1: the order of every five to ten years. A couple
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  Speaker 1: of things that were different that happened back in two
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  Speaker 1: thousand and fourteen and continue today. One is UH with
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  Speaker 1: the oversupply, it came at a time when there were
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  Speaker 1: a couple of sluggish economies both throughout Asia and Europe,
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  Speaker 1: so we did and get that normal response to lower
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  Speaker 1: fuel prices that come with an oversupply situation. The second
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  Speaker 1: that's more interesting and more specific to oil field services
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  Speaker 1: is this promise of unconventionals here in North America, and
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  Speaker 1: we're beginning to see evidence of another regions of the
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  Speaker 1: world has begun to take full effect. And with that,
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  Speaker 1: the oil field service companies have been at the forefront
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  Speaker 1: really of defining UH that promise through the technology and
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  Speaker 1: through the capital investments that they've made on their half
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  Speaker 1: UH that are really complementary to a lot of the
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  Speaker 1: funds that the operators were pushing into the industry. UH.
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  Speaker 1: And I'll say, for instance, if we look just at
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  Speaker 1: the permium base in here out in West Texas and
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  Speaker 1: New Mexico. Uh, compared to two years ago, well, activity
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  Speaker 1: is determined by oil field services companies is down almost
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  Speaker 1: seventy yet production is almost flat. It's it's roughly percent down.
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  Speaker 1: And a lot of that, uh efficiency or productivity growth
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  Speaker 1: has really been enabled through advancements at the oil field
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  Speaker 1: service companies have been able to create through R and
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  Speaker 1: D programs and through efficiency programs that really the operators
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  Speaker 1: are standing to benefit from. So, in other words, people
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  Speaker 1: have been kind of worried about the energy market being
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  Speaker 1: you know, somebody layoffs under maintain ascids, that the oil
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  Speaker 1: field services be this big bottleneck as demand for crude
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  Speaker 1: begins to pick up and that could cause prices to
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  Speaker 1: your rise. You're kind of letting us know maybe not,
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  Speaker 1: maybe probably not. Uh. What about Also though the OPEC meeting,
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  Speaker 1: you know, next month, informal talks for all these big
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  Speaker 1: global suppliers are going to be taking place. How's that
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  Speaker 1: going to enter into what's the key question to the
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  Speaker 1: price of oil? Ahead of that? I think when I
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  Speaker 1: think about what OPEC is able to do, certainly the
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  Speaker 1: decisions that come out of those meetings have the potential
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  Speaker 1: to create an uptick in the market. Uh maybe through
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  Speaker 1: just the shifting of uh kind of the depression that's
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  Speaker 1: taken place in the market. I think a lot of
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  Speaker 1: people have, you know, thought a year ago this market
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  Speaker 1: would already have begun its recovery, and here we are
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  Speaker 1: a year later, effectively below or or at where we
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  Speaker 1: were this time last summer. Um. But frankly, any decision
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  Speaker 1: that's made by OPEC and in some of the other
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  Speaker 1: large producing companies, I have a feeling will be more
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  Speaker 1: temporary in nature and really delay the inevitable. Uh. When
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  Speaker 1: I look at the numbers and and the reserve potentials. Uh,
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  Speaker 1: you know, the the unconventional base that's here in North
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  Speaker 1: America and other regions around the world has the potential
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  Speaker 1: to really disrupt OPEC and other large producing nations ability
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  Speaker 1: to really regulate and control the market. Maybe they can
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  Speaker 1: do it in the next couple of years, but I
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  Speaker 1: think they're reaching the end of their rope in terms
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  Speaker 1: of overall demand and what percentage they control of that.
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  Speaker 1: Where's the price of oil going next? Are you suggesting
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  Speaker 1: maybe it's going down because there's not going to be
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  Speaker 1: this bottleneck or where do you see what we're all
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  Speaker 1: going from here? I think there'll be some short term
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  Speaker 1: volatility of it, depending on what happens in next month's meetings,
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  Speaker 1: But when I look at the fundamentals, it supports a
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  Speaker 1: more moderate growth position UH in terms of pricing over
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  Speaker 1: the next several years, and so we will get back
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  Speaker 1: to those seventy and eighty dollar pricing levels, but that
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  Speaker 1: will come partly through inflation and partly through increase demand
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  Speaker 1: over an extended period of time. Sean Heyra, thank you
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  Speaker 1: so very much for joining us principle for oil and
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  Speaker 1: gas at a consulting company A T. Kearney in Houston, Texas.
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  Speaker 1: So up next, we are going to be taking a
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  Speaker 1: look at a couple of very big stories. In particular Apple,
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  Speaker 1: it may be facing billions of euros in tax arreers
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