Latest / Bloomberg Intelligence / Prestige's Schenker on OPEC Decision: Bearish for Price (Audio)

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Prestige's Schenker on OPEC Decision: Bearish for Price (Audio) · Bloomberg Intelligence

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  Speaker 1: the Opeque meeting today, no quota met downward pressure on
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  Speaker 1: OPEC meeting today. Crude oil now up eight cents forty
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  Speaker 1: again recapping stocks higher across the board. SMP five hundred
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  Speaker 1: I'm Charlie Vllett and that's a Bloomberg Business flash. This
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  Speaker 1: is taking stock with Kathleen Hayes and Grim Box on
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  Speaker 1: Bloomberg Radio. OPEC is going to stick to its policy
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  Speaker 1: of unfettered production after members failed again to agree on
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  Speaker 1: a new output ceiling. However, ministers are united in their
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  Speaker 1: optimism that global oil markets markets are improving, and the
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  Speaker 1: group was also able to appoint a news Secretary General,
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  Speaker 1: Nigeria's Mohammed Barkindo, something that couldn't agree on last year.
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  Speaker 1: Mr Barkindo gave some remarks today saying that the group
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  Speaker 1: is going to work to regain the unity it had
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  Speaker 1: had in the past and the confidence of the international
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  Speaker 1: community UH, saying that OPEC is making a comeback as
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  Speaker 1: it overcomes temporary difficulties. Now he's in Vienna today, not
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  Speaker 1: only Mr Barkindo, but our next guest, Jason Shanker, president
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  Speaker 1: of Prestige Economics. He's based in Austin, Texas, but he's
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  Speaker 1: joining us from Austria today where Opek met. So, Jason,
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  Speaker 1: what is your sense of the mood coming out of
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  Speaker 1: this putting the best face on the fact that they
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  Speaker 1: couldn't agree on a quota or is it is it
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  Speaker 1: true that the meetings were not rankers, they were a
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  Speaker 1: little friendlier and they're heading towards more of an agreement
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  Speaker 1: in the future. So I think it's both. So I
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  Speaker 1: think the eating was less rancorous. It was described as
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  Speaker 1: you know, amenable and friendly and the sorts of things,
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  Speaker 1: and you know, it wasn't as it has been at
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  Speaker 1: past meetings where you have people kind of storm out
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  Speaker 1: of the meeting and that's not as good. But that
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  Speaker 1: being said, even though it was a more positive meeting,
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  Speaker 1: no production quota was adopted, No target was adopted. Uh
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  Speaker 1: and UH. I know that the Saudis had worked very
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  Speaker 1: hard to put together what turned out to be quite
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  Speaker 1: a complicated proposal that they thought would make the interests
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  Speaker 1: of both Iran and Saudi and all the rest of
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  Speaker 1: the members, and yet it wasn't accepted and there's no
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  Speaker 1: production number. Again, So where will the price of oil go? Today?
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  Speaker 1: We've got West Texas Intermediate trading around forty nine dollars
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  Speaker 1: and change just slightly higher. So it has certainly hasn't
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  Speaker 1: um taken a beating on this news today? Is the
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  Speaker 1: bottom in for oil now? Well, I think, you know,
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  Speaker 1: if we look back to where we were in January,
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  Speaker 1: I think that, yeah, I mean, we've come a long
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  Speaker 1: way since those loads in January, but that doesn't mean
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  Speaker 1: that there aren't downside risks. And I'd say, if you
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  Speaker 1: wanted to assess where those risks are, I would probably
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  Speaker 1: be looking at industrial medals prices like copper or aluminum,
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  Speaker 1: or fair scrap prices, which, although we're stronger a couple
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  Speaker 1: of months ago, have taken a beating in the last
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  Speaker 1: six weeks um following a couple of very weak Chinese
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  Speaker 1: p m I numbers. The schene Um just out on
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  Speaker 1: the first of the month out yesterday showed that Chinese
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  Speaker 1: manufacturing has been contracting for seventeen in the past eighteen
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  Speaker 1: consecutive months. That's a year and a half of a
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  Speaker 1: manufacturing recession in China's been going on, and that's thirty
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  Speaker 1: of their economy. So that's hurting medals and there's a
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  Speaker 1: risk as in the last two years, when the summer
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  Speaker 1: driving season ends uh, that oil prices could follow medals
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  Speaker 1: lower regardless of a supply demand balance. Well, you know
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  Speaker 1: our Bloomberg story about keeping the status quo after feeling
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  Speaker 1: to cree on output cap said, the fact that oil
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  Speaker 1: has rallied about from the twelve year old January suggests
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  Speaker 1: the Saudi led decision a couple of years ago to
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  Speaker 1: maintain output amid a global glut, in fact maybe make
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  Speaker 1: it worse. It's finally paying off with higher cost producers
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  Speaker 1: cutting back. So I think, uh, that is partially true.
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  Speaker 1: So that the um, you know, the the vet tolet prices,
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  Speaker 1: to to let go of the rudder and let the
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  Speaker 1: market kind of find its own way has paid off.
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  Speaker 1: Higher cost producers have been forced out of the market.
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  Speaker 1: More producers will be forced out of the market because
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  Speaker 1: fifty dollars isn't very profitable for some producers, and campex
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  Speaker 1: has been cut significantly in the United States. Now that
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  Speaker 1: being said, while that has been good for OPEC market share,
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  Speaker 1: the prices are still low enough that this is problematic
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  Speaker 1: for a number of opaque economies even at fifty dollars.
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  Speaker 1: And if you look at some of the I m
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  Speaker 1: F growth forecast or some uh, pretty dis more growth
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  Speaker 1: forecast for some OPEC members in the year ahead. And
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  Speaker 1: of course not all OPEC members operate on the same
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  Speaker 1: cost curve, so this is something that is uh yeah,
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  Speaker 1: it could could prove beneficial for OPEC providing oil into
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  Speaker 1: the market, but also hurts the profitability of some of
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  Speaker 1: those members. You know. A very smart fellow named Jason Shanker,
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  Speaker 1: Oh that's you, president of Stige Economics, also quoted this story.
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  Speaker 1: The lack of oil production targets bears for prices because
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  Speaker 1: the hopes of ideal to increased in the past couple
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  Speaker 1: of days. Jason Shanker says, say goodbye to OPEX efficacy
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  Speaker 1: as united groups. So you don't think Mohammed Markendo is
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  Speaker 1: the guy to to pull this group strongly together again.
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  Speaker 1: I mean, is OPEC really over as the powerhouse of
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  Speaker 1: the oil setting market oil price setting market. No, you know,
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  Speaker 1: I don't think it's over, and I don't think that
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  Speaker 1: the Secretary General is the one who should be uh,
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  Speaker 1: you know, really put to task with pulling the group together.
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  Speaker 1: It's uh, you know, I think it's unfortunate for the
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  Speaker 1: group that that there were attempts to try to have
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  Speaker 1: cohesion and it didn't come together. But after a couple
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  Speaker 1: of meetings where there's no production target, something that had
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  Speaker 1: been in place for thirty five years. Uh, you know,
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  Speaker 1: I think markets look at this and they begin to wonder, Uh,
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  Speaker 1: you know, does OPEC still have a leadership role. There's
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  Speaker 1: not really a uniform set of decisions. What does this mean?
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  Speaker 1: Are they going to remain effective moving forward? Will things
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  Speaker 1: improve when Iranian production gets back to sort of pre
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  Speaker 1: embargo levels. Is that when there's going to be more
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  Speaker 1: of a negotiation. Those are the questions out there right now.
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  Speaker 1: Jason Shaker, thanks so much for joining us. I hope
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  Speaker 1: you have a nice time in Vienna where Jason's been
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  Speaker 1: attending the OPEC meeting today. No output target met, he says,
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  Speaker 1: that is still bearish for oil prices. I'm Kathleen Hayes.
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