Latest / Bloomberg Intelligence / OpCo's Gheit Sees New Normal of Oil Prices in the 60s (Audio)

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OpCo's Gheit Sees New Normal of Oil Prices in the 60s (Audio) · Bloomberg Intelligence

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  Speaker 1: Charlie, thank you from the Bloomberg News Room, I Mark Crumpton.
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  Speaker 1: you and again recapping equities lower part of a global
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  Speaker 1: sell off, with the SMP downs seventy six points to
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  Speaker 1: two thousand thirty seven, a drop there a three points
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  Speaker 1: six percent. Our coverage continues right here on Bloomberg and
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  Speaker 1: for our continued coverage of Brexit, including special editions of
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  Speaker 1: Bloomberg Surveillance Saturday and Sunday beginning at seven am. I'm
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  Speaker 1: Charlie Pellett and that's a Bloomberg business flash. You're listening
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  Speaker 1: to taking Stock with Bim Box and Kathleen Hayes on
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  Speaker 1: Bloomberg Radio. Oil tumbling on with most commodities, a global
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  Speaker 1: flight from risky assets after the UK voted to lead
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  Speaker 1: the European Union. Whether the route last depends on how
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  Speaker 1: world governments deal with the turmoil. We turned now to
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  Speaker 1: Follow Gate, Managing director and oil and gas analysts at
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  Speaker 1: Oppenheimer and Code, to get his analysis of what this
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  Speaker 1: political economic financial event means for oil. Follow How surprised
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  Speaker 1: were you by the outcome? It's uncertainty. It's basically sharing
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  Speaker 1: the unknown. No one really knows exactly what the impact
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  Speaker 1: will be very difficult to quantify, but the cell off
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  Speaker 1: is likely to level off, and I would not be
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  Speaker 1: surprised at all. In the next few days and few weeks.
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  Speaker 1: UH oil prices were recovered on strong frain, on strong fundamentals.
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  Speaker 1: In general. UH, the amand will continue to move at least,
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  Speaker 1: you know, parallel to what we have before. But supply
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  Speaker 1: is coming down, so therefore oil prices are likely to
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  Speaker 1: move higher. The question is not if it is when
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  Speaker 1: and by how much? Okay, In fact, the International Energy agency,
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  Speaker 1: which is a Paris based advisor to industrialized nations, saying
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  Speaker 1: in a statement today that the fundamentals of oil is
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  Speaker 1: applied to main demand remain unchanged after the vote, basically
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  Speaker 1: echoing what you're saying. I got followed with the with
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  Speaker 1: the main risk here, perhaps the only risk be uh,
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  Speaker 1: if there's some kind of global recession. And I just
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  Speaker 1: saw some news breaking on the Bloomberg terminal having to
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  Speaker 1: do with the UK and Moodies United Kingdom outlook Apparently
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  Speaker 1: UH too negative by Moodies the ratings of firms, So
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  Speaker 1: obviously for the United Kingdom this is reverberating. Is that
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  Speaker 1: the is that the main dynamic that could change the
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  Speaker 1: supply demand balance for oil? Yeah, basically global economic growth
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  Speaker 1: will entail certain demand level and if that does not materialize,
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  Speaker 1: obviously you're going to lose the other part of the equation.
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  Speaker 1: It's supply and demand. You can talk about the demand,
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  Speaker 1: but supply is heading down. There is no if for
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  Speaker 1: butts about it. Because the industry has kept kept up
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  Speaker 1: spending significantly over the last two years. The industry have
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  Speaker 1: trouble maintaining production, let alone you know, grow in production
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  Speaker 1: when all prices were eighty on hundred dollars, So nobody
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  Speaker 1: should expect that the industry would be able no matter
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  Speaker 1: what they can do. Will course, saving and you know,
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  Speaker 1: efficiency improvement and all these things will not make up
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  Speaker 1: for the drop of fifty dollar down. It is just impossible.
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  Speaker 1: So demand will you know, move side away, but supply
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  Speaker 1: will come down. So therefore the balances do. The question
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  Speaker 1: again is when is it going to be by the
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  Speaker 1: end of this year or early next year? You know, um,
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  Speaker 1: we had our Bloomberg Intelligence Latin American economists on today,
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  Speaker 1: Philip Fernandez. He said, basically, this is just not such
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  Speaker 1: a big deal for the Latin American countries. Maybe some
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  Speaker 1: impact on the Bank of Mexico if the pace will
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  Speaker 1: gets hit again. Is it kind of a similar story
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  Speaker 1: for the Middle East that this will be watched from Afar?
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  Speaker 1: It will be that we have our own issues, our
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  Speaker 1: own you know things, And of course this is one
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  Speaker 1: of the this is the region where you most watch
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  Speaker 1: for oil geopolitically, but no repercussions, no connections that matter
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  Speaker 1: here to be with the EU. Yeah, I mean, you know,
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  Speaker 1: I have to remember also the growth in energy and
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  Speaker 1: oil demand, it's not coming from Europe. It's coming from
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  Speaker 1: outside of your of in the US. And this is
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  Speaker 1: where basically people look at the demand supply and the
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  Speaker 1: demand is not coming is coming from China, it is
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  Speaker 1: coming from India, and they will have very little to
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  Speaker 1: do with whether the UK is in the European Union
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  Speaker 1: or outside. So what use the price of oil going funnel? Well,
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  Speaker 1: we still maintained that the new normal is going to
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  Speaker 1: be somewhere in the sixty plus dollar level. Fifty percent
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  Speaker 1: of US producer cannot sustain operation unless or until oil
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  Speaker 1: prices exceed sixty dollars. So this is the price that
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  Speaker 1: we are going to see. When that's going to happen again,
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  Speaker 1: you know, it could be in six months, could be
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  Speaker 1: in the year. But fifty dollar oil is not sustainable
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  Speaker 1: because the longer we stay at fifty dollar, the more
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  Speaker 1: decline we're going to see, and the bigger the upside
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  Speaker 1: after that, when the market gets back into balance, we
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  Speaker 1: are going to see a surgeon or prices, which I
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  Speaker 1: do not want to see because we'll create the same
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  Speaker 1: cycle again and we really don't need that. So, you know,
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  Speaker 1: slow increase in oil prices over the next six or
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  Speaker 1: twelve months will get us the sixty hour and that
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  Speaker 1: will be a sustainable level. It sounds pretty good for
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  Speaker 1: the global economy. As someone who's watched um the world
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  Speaker 1: and markets and geopolitics for so long, what do you
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  Speaker 1: make of this decision? Is this the end of the
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  Speaker 1: EU as we know it? I was in Europe actually
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  Speaker 1: for a few weeks in the last couple of months,
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  Speaker 1: and I can tell you most of the people that
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  Speaker 1: I talked to in London especially, they were not very
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  Speaker 1: happy at always being members of the European Union. And
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  Speaker 1: you're complain about you know, people coming in, you know,
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  Speaker 1: raising real estate prices, making life more difficult, competing with
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  Speaker 1: them for the same jobs and things like that. So
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  Speaker 1: these are you know, part of nationalism that unfortunately is
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  Speaker 1: going throughout the whole world. Okay, thank you so very
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  Speaker 1: much for joining us for an Oppenheimer and Coal working
• 8:02
  Speaker 1: as oil and gas analysts are special. Extended Brexit coverage
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