Latest / Bloomberg Intelligence / Big EU-Mercosur Trade Deal Sends Message To Trump, UK

Transcript

Big EU-Mercosur Trade Deal Sends Message To Trump, UK · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Perhaps Mexico is off the hook
• 0:22
  Speaker 1: with President Trump saying that tariffs there are not going
• 0:25
  Speaker 1: to be reinstated because of the ongoing progress made with immigration. However,
• 0:30
  Speaker 1: EU exactly in the crosshairs of the president, with President
• 0:34
  Speaker 1: Trump talking about a possible new round of tariffs there.
• 0:38
  Speaker 1: Joining us now is TERA's Raphael Bloomberg opinion editor covering
• 0:42
  Speaker 1: European politics and economics, joining us from London. Terra's so
• 0:46
  Speaker 1: let's start there. What is President Trump proposing now? So,
• 0:50
  Speaker 1: President Trump, UH is proposing a about three billion of
• 0:54
  Speaker 1: tariffs UM and you know what's been an escalation of
• 0:58
  Speaker 1: the EU US rage spat. These have to do not
• 1:02
  Speaker 1: with UH auto import but UM a ongoing, long long
• 1:08
  Speaker 1: standing dispute over subsidies for boeing UM and air Bus.
• 1:13
  Speaker 1: So the US alleges that air Bus has been illegally subsidized. Uh.
• 1:17
  Speaker 1: The EU has countered that Boeing has been illegally subsidized.
• 1:21
  Speaker 1: And this has just been a dispute that's gone on
• 1:24
  Speaker 1: and on. It's been um, you know, in the court.
• 1:27
  Speaker 1: And Trump is making these latest uh tariffs under w
• 1:32
  Speaker 1: t O rules. So the w t O still needs
• 1:35
  Speaker 1: to rule on his list in the summer. But what
• 1:38
  Speaker 1: it seems to be uh you know doing is just
• 1:41
  Speaker 1: ratcheting up the pressure on Europe ahead of what were
• 1:44
  Speaker 1: to be US EU trade talks, but those now seem
• 1:47
  Speaker 1: to have stalled, and there's this impression that Trump is
• 1:49
  Speaker 1: like turning his you know, attention away from China and
• 1:52
  Speaker 1: toward Europe. So tooreas, what is the expectation in terms
• 1:56
  Speaker 1: of the response from the European Union? Uh mean, the
• 2:00
  Speaker 1: European Union has tended to respond in kind to the
• 2:03
  Speaker 1: Last time Trump issued a list of uh, you know,
• 2:07
  Speaker 1: of items that he was going to uh impose higher
• 2:11
  Speaker 1: terrorists on, the EU issued a counter list. Um. I
• 2:14
  Speaker 1: think the EU will will seek to see what the
• 2:18
  Speaker 1: w t O says about Trump's list, but they'll be prepared,
• 2:21
  Speaker 1: they'll be preparing their own uh list of of tariffs
• 2:25
  Speaker 1: in response, and indeed Bank of England Governor Mark Karney
• 2:28
  Speaker 1: was warning today that the rising trade tensions, the return
• 2:33
  Speaker 1: to protectionism is going to be a hit on the
• 2:36
  Speaker 1: global economy and also on the UK economy. So Torey's
• 2:39
  Speaker 1: you wrote a really interesting column that we were reading
• 2:41
  Speaker 1: this morning about how President Trump maybe targeting Europe, but
• 2:46
  Speaker 1: it hasn't killed the sort of world trade order, and
• 2:48
  Speaker 1: that Europe is going ahead, uh certainly with trade negotiations
• 2:52
  Speaker 1: as specific regions such as Latin America. Can you give
• 2:55
  Speaker 1: us a sense of what Europe is doing right now? Yeah,
• 2:57
  Speaker 1: I mean, it's it's a really the sort of interesting
• 3:01
  Speaker 1: progression for Europe. For so long we've heard very valid
• 3:05
  Speaker 1: criticisms of Europe as protectionists in some areas, very slow moving, bureaucratic,
• 3:10
  Speaker 1: and yet since Donald Trump was elected, Europe has done
• 3:12
  Speaker 1: a number of trade deals with Canada, with Mexico, with Japan,
• 3:16
  Speaker 1: and now this deal with mircos or which is Brazil, Argentina,
• 3:19
  Speaker 1: Paraguay and Uruguay. And this is a pretty massive deal.
• 3:23
  Speaker 1: It uh it slashes or completely eliminates tariffs on um
• 3:30
  Speaker 1: of of of exports that are going between Mercosur and
• 3:35
  Speaker 1: the EU, and I think it's it sends a message
• 3:39
  Speaker 1: both to Brexitters in Britain and to Trump that says,
• 3:42
  Speaker 1: you know, the EU, one of the world's you know,
• 3:44
  Speaker 1: the world's largest trade block but also a massive trading superpower,
• 3:50
  Speaker 1: is simply going to do things a bit differently. It
• 3:52
  Speaker 1: is going to find alliances where it can to uphold
• 3:55
  Speaker 1: the trade order. So tre as you mentioned Brexit, I'm
• 3:58
  Speaker 1: wondering to what extent do you think the E the
• 4:01
  Speaker 1: UK is looking at the rising trade tensions between the
• 4:04
  Speaker 1: US and the European Union and saying, Gee, this trade
• 4:07
  Speaker 1: stuff is difficult. And you know President Trump was, you know,
• 4:11
  Speaker 1: promising a great trade deal with the UK once they
• 4:14
  Speaker 1: exit the European Union. Do you think people are starting
• 4:17
  Speaker 1: to say, g maybe we don't we maybe can't take
• 4:19
  Speaker 1: him at face value on that one. Yeah, I mean
• 4:21
  Speaker 1: the Brexitters aren't saying that publicly, but certainly some of
• 4:25
  Speaker 1: the assumptions that underscored the argument for leaving the EU
• 4:29
  Speaker 1: are now being seriously challenged. One of those assumptions was
• 4:33
  Speaker 1: that Britain would get new trade deals, they would be
• 4:36
  Speaker 1: advantageous trade deals, and they would be uh, they would
• 4:39
  Speaker 1: be done fairly quickly, and that um now looks h
• 4:44
  Speaker 1: incredibly unlikely if it ever looked, you know, feasible. Uh.
• 4:47
  Speaker 1: The idea that it would roll over existing EU agreements
• 4:50
  Speaker 1: also hasn't happened. And then seeing how Trump very aggressively
• 4:54
  Speaker 1: pursues uh, what he sees to be American interests, whether
• 4:58
  Speaker 1: it's Mexico or China, I think should give a lot
• 5:02
  Speaker 1: of pause because if the US is to do a
• 5:04
  Speaker 1: trade deal with the UK, it will be aggressively press
• 5:08
  Speaker 1: pressing the interests of American poultry, uh, farmers, agriculture producers,
• 5:14
  Speaker 1: and you know, all of the other industries where the
• 5:16
  Speaker 1: US has export interests and wants to see markets opened, trades.
• 5:20
  Speaker 1: I want to pick up on something that you were
• 5:22
  Speaker 1: talking about previously. This deal that the EU struck with
• 5:26
  Speaker 1: America sore after twenty years of talks, and I'm just
• 5:29
  Speaker 1: wondering whether the EU is feeling somewhat emboldened by President
• 5:34
  Speaker 1: Trump stands in the sense that the United States is
• 5:36
  Speaker 1: taking more of a back seat when it comes to
• 5:38
  Speaker 1: global trade talks, giving some room possibly for in the
• 5:42
  Speaker 1: European region to step in. Yeah, I mean I think
• 5:46
  Speaker 1: from the EU perspective. If you know, the EU is
• 5:49
  Speaker 1: a it's a block of sovereign nations. If they can't
• 5:52
  Speaker 1: act as a block, what are they for? I think
• 5:56
  Speaker 1: member states will begin to question what value they're getting
• 5:59
  Speaker 1: from your up if if the EU cannot show that
• 6:02
  Speaker 1: it can uh that it can it can work together
• 6:04
  Speaker 1: to uh improve access of EU companies to different markets.
• 6:09
  Speaker 1: So this is uh, you know, and this is a
• 6:12
  Speaker 1: a concerted effort on the part of the EU to
• 6:15
  Speaker 1: get these these deals done, whether it's you know, Canada, Mexico,
• 6:18
  Speaker 1: Japan or Marcus Or. And I think it is a
• 6:20
  Speaker 1: response to Trump, it's a response to Brexit as well.
• 6:23
  Speaker 1: And so in that way, ironically, these you know, populist
• 6:27
  Speaker 1: um forces UH in the world are actually you know,
• 6:31
  Speaker 1: pushing the EU in a direction that it's critics have
• 6:34
  Speaker 1: so long said that it should move in, which is,
• 6:36
  Speaker 1: you know, to be more market opening. And that has
• 6:40
  Speaker 1: also required the EU to stare down its own protection
• 6:43
  Speaker 1: as forces, so agriculture lobbies, ethanol lobbies and and that
• 6:46
  Speaker 1: sort of thing, and that and that I think it's
• 6:48
  Speaker 1: a very positive move for Europe. Now, whether the Marcus
• 6:51
  Speaker 1: Or deal will hold, it needs to be ratified by
• 6:53
  Speaker 1: all of the member parliaments. Remains to be seen. But
• 6:56
  Speaker 1: just the fact that after twenty years of negotiations, as
• 6:58
  Speaker 1: you said, they got to this point UM tells us
• 7:01
  Speaker 1: a lot. Tres Raphael, thank you so much. Dress Bloomberg
• 7:05
  Speaker 1: opinion editor covering European politics and the economy. Well, US
• 7:23
  Speaker 1: automakers may report the worst first half for new vehicle
• 7:27
  Speaker 1: sales since today, although deliveries to fleet customers will probably
• 7:31
  Speaker 1: take some of the sting out of the weaker consumer
• 7:33
  Speaker 1: demand to get the latest returned to Michelle Krebs. Michelle
• 7:36
  Speaker 1: is executive analyst at Auto trader dot com based in Detroit. Michelle,
• 7:40
  Speaker 1: thanks so much for joining us. I just wonder if
• 7:42
  Speaker 1: you could start off by just giving us a state
• 7:45
  Speaker 1: of the current state of the US car business. Sure,
• 7:49
  Speaker 1: you know it's still relatively strong, but what we have
• 7:52
  Speaker 1: seen in this first half and June continued the trend
• 7:55
  Speaker 1: is it's been volatile and unpredictable. We've seen UM months
• 8:00
  Speaker 1: that were far better than we expected and some that
• 8:03
  Speaker 1: were far worse. What we do definitely see is a
• 8:06
  Speaker 1: retail demand is softening and that is being offset by
• 8:10
  Speaker 1: higher fleet sales. Sales to commercial companies, UM daily rental companies,
• 8:17
  Speaker 1: because there's some advantage to adding to a replacing their
• 8:22
  Speaker 1: fleets under tax reform. So meanwhile, we are getting some
• 8:25
  Speaker 1: initial reports and they have been better than expected. And
• 8:29
  Speaker 1: I'm trying to figure out how to even look at
• 8:33
  Speaker 1: some of these readings. In other words, are we looking
• 8:36
  Speaker 1: for a bottom in the slowdown in the auto sector?
• 8:39
  Speaker 1: Are we looking for what? Are what are you looking for? Um? Well,
• 8:42
  Speaker 1: we're anticipating that the second half will be even more
• 8:45
  Speaker 1: challenging than the first half. Our our forecast for this
• 8:48
  Speaker 1: year is sixteen point eight million vehicles to be sold.
• 8:52
  Speaker 1: That's down from seventeen to seventeen three last year, and
• 8:55
  Speaker 1: we expect a little more softening next year. This has
• 8:58
  Speaker 1: been a big run we've had. This is an unprecedented
• 9:02
  Speaker 1: expansion in the economy and certainly were for vehicle sales,
• 9:05
  Speaker 1: and so we do see some softening. However, you know,
• 9:08
  Speaker 1: sixteen point eight million is still a pretty good year.
• 9:11
  Speaker 1: So Michelle, just give us a sense of kind of
• 9:13
  Speaker 1: what US consumers are buying is it's still primarily the
• 9:17
  Speaker 1: trucks and SUVs. Correct, car sales are down have been
• 9:24
  Speaker 1: for the last couple of years. And we have seen
• 9:26
  Speaker 1: companies take eliminate car models from their lines, like for
• 9:30
  Speaker 1: the Forward Focus and Chevrolet crews are gone. UM. We
• 9:34
  Speaker 1: are seeing UH crossovers, those sport utility like vehicles built
• 9:39
  Speaker 1: on car platforms and sport utilities doing well. And trucks
• 9:42
  Speaker 1: are having an incredible time, probably the highest truck sales
• 9:46
  Speaker 1: in history. And a lot of that has to do
• 9:48
  Speaker 1: with UM. Chrysler's Ram division had an amazing UH month
• 9:53
  Speaker 1: and first half. It's now moved into the second spot
• 9:57
  Speaker 1: behind ahead of Chevrolet Silver. So that's caused a lot
• 10:01
  Speaker 1: of chat or here in Detroit, the truck wars. So
• 10:05
  Speaker 1: I just based on Bloomberg surveys, US automakers are poised
• 10:09
  Speaker 1: to report the worst first half for new vehicle retail
• 10:12
  Speaker 1: sales since two thousand thirteen. Today we've already gotten some
• 10:15
  Speaker 1: of those numbers. They have been somewhat better than expected.
• 10:18
  Speaker 1: I'm wondering you said that you're expecting a further slow
• 10:21
  Speaker 1: down in the second half. Why is this? Is this
• 10:24
  Speaker 1: because of China? Is this because of just a slowing
• 10:26
  Speaker 1: US economy slow? Yes, I think slowing US economy UM
• 10:33
  Speaker 1: and also UH weakening retail demand. The we also expect
• 10:37
  Speaker 1: some credit tightening even though interest rates may go down
• 10:41
  Speaker 1: and we have not seen that in car loans and
• 10:43
  Speaker 1: car prices are going up. That's creating an affordability problem
• 10:47
  Speaker 1: for a lot of consumers, have knocked them right out
• 10:49
  Speaker 1: of the new car market into the used UM. So
• 10:52
  Speaker 1: there are a lot of factors on the consumer side,
• 10:55
  Speaker 1: but we do think the sales to fleets will push
• 10:58
  Speaker 1: it up a little bit. So you mentioned, just Michelle,
• 11:02
  Speaker 1: the used car market give us a sense of the
• 11:05
  Speaker 1: health and in the dynamics driving that market. Um. Yes,
• 11:09
  Speaker 1: so the used car market is very strong. Uh. We've
• 11:13
  Speaker 1: had record leasing a few years ago, and so that
• 11:16
  Speaker 1: has created this UM. All these off lease vehicles are
• 11:20
  Speaker 1: coming back into the market is used vehicles and those
• 11:24
  Speaker 1: are being snapped up. It used to be a lot
• 11:26
  Speaker 1: of lease vehicles were actually cars. Well now those are
• 11:29
  Speaker 1: sport utilities and crossover vehicles and that's exactly what the
• 11:32
  Speaker 1: consumer wants. And if they buy it as a three
• 11:35
  Speaker 1: year old vehicle we call them nearly new, UM, they
• 11:38
  Speaker 1: get a big discount. And so that's giving people who
• 11:41
  Speaker 1: are are more budget constrained a place to go to
• 11:44
  Speaker 1: buy a vehicle new to them. Michelle you you mentioned
• 11:47
  Speaker 1: fleet sales and how that's questioning some of the blow
• 11:50
  Speaker 1: in the slowdown of retail sales. What's the drawback with
• 11:54
  Speaker 1: with fleet sales, because there is one on both the
• 11:56
  Speaker 1: resale value side as well as just some of the
• 12:00
  Speaker 1: deals that some of these auto manufacturers have to cut
• 12:03
  Speaker 1: with the purchasers of those fleets. That used to be
• 12:06
  Speaker 1: the case, that is not the case anymore. It used
• 12:08
  Speaker 1: to we used to get the lecture there's good fleet
• 12:10
  Speaker 1: and there's bad fleet. The bad fleet is not that bad.
• 12:13
  Speaker 1: If you talk to daily rental companies that are buying vehicles,
• 12:16
  Speaker 1: they they're complaining they're not getting the big discounts anymore. Um.
• 12:20
  Speaker 1: So the automakers are being much smarter, uh, and they
• 12:24
  Speaker 1: are not giving these huge discounts. So it actually is
• 12:27
  Speaker 1: a pretty darn good business. Michelle Krabs, thank you so
• 12:30
  Speaker 1: much for being with us. Michelle Crabs, executive analyst with
• 12:33
  Speaker 1: our Auto trader dot com, which is a company of
• 12:36
  Speaker 1: Cox Automotive based in Detroit. Eleven United States have actually
• 12:57
  Speaker 1: legalized marijuana, with eleanor By becoming the latest joining us
• 13:01
  Speaker 1: now to talk about that is Steve White, chief executive
• 13:04
  Speaker 1: and founder of Harvest Health and Recreation, which is a
• 13:08
  Speaker 1: company specializing in uh the weed vweed actually vieweed. Steve,
• 13:15
  Speaker 1: thank you so much for being with us. Can you
• 13:16
  Speaker 1: just start by saying what Harvest Health and Recreation does. So,
• 13:21
  Speaker 1: we're one of a handful of companies that does everything
• 13:24
  Speaker 1: along the value chain, from growing cannabis to making products,
• 13:27
  Speaker 1: to selling it in retail outlets and owning those retail outlets.
• 13:32
  Speaker 1: And we are one of a few that has a
• 13:34
  Speaker 1: presence in many states across the US. So, Steve, just
• 13:39
  Speaker 1: give us a sense of the US market. How significant
• 13:42
  Speaker 1: is that we're you know, Illinois is now the eleventh state.
• 13:45
  Speaker 1: Just give us a sense of kind of how that
• 13:46
  Speaker 1: rollout is progressing across the US. It's really exciting times
• 13:50
  Speaker 1: for the cannabis industry the way we look at it
• 13:54
  Speaker 1: as we When you talk about the eleventh state to
• 13:57
  Speaker 1: roll out of recreational program, it tells you about the
• 14:00
  Speaker 1: potential for growth in the US more than anything, and
• 14:03
  Speaker 1: the opportunities for the US players. It also tells you
• 14:07
  Speaker 1: that it's happening at a regular cadence, which tells you
• 14:11
  Speaker 1: that there's no reason to expect that the the changes
• 14:14
  Speaker 1: will slow down at any point in the future. When
• 14:17
  Speaker 1: we talk about legalization, often we're talking about medical marijuana use.
• 14:21
  Speaker 1: How do you distinguish medical versus recreational and where the
• 14:23
  Speaker 1: opportunities lie for both? So they're both are are great opportunities,
• 14:31
  Speaker 1: and usually medical precedes the recreational changes. But for us,
• 14:36
  Speaker 1: we look at you know, a medical opportunity is one
• 14:39
  Speaker 1: where you can get in and start establishing your brand
• 14:41
  Speaker 1: in a particular state or a particular area, and then
• 14:45
  Speaker 1: the change to recreation is really about a significant growth
• 14:49
  Speaker 1: in the size of your marketplace um, And so we
• 14:53
  Speaker 1: look at one as the opportunity to kind of stick
• 14:55
  Speaker 1: our claim and then the second to really expand the business. So, Steve,
• 14:59
  Speaker 1: you mentioned just their brands. Has there been any brand
• 15:03
  Speaker 1: developed within the cannabis market. Is there a Marlborough of
• 15:07
  Speaker 1: cannabis for example, Well, I mean you kind of set
• 15:10
  Speaker 1: it yourself at the beginning when you're talking about the
• 15:12
  Speaker 1: eleventh state to actually be able to sell to the
• 15:15
  Speaker 1: vast majority of the population eleven out of fifty states,
• 15:19
  Speaker 1: it's pretty premature to declare a Marlborough um amongst any
• 15:25
  Speaker 1: um any of the brands. But what we're seeing, or
• 15:29
  Speaker 1: what we believe is that there is a there are
• 15:32
  Speaker 1: some conditions that are being or some foundations that are
• 15:34
  Speaker 1: being laid for brand development, and for us, we see
• 15:37
  Speaker 1: it as acquisition of licenses and being able to communicate
• 15:41
  Speaker 1: to those consumers because you can't communicate through normal channels,
• 15:45
  Speaker 1: So picking up the licenses and developing a footprint is
• 15:49
  Speaker 1: what we think is going to lead to it. But
• 15:51
  Speaker 1: as a bit premature to talk about the establishment of
• 15:54
  Speaker 1: a Marlborough at this point. Well, talking about Marlborough, what
• 15:57
  Speaker 1: about Philip Morris, what about al Trea. I mean they
• 15:59
  Speaker 1: have in pretty quiet with respect to their involvement in
• 16:03
  Speaker 1: the cannabis industry, but some speculate they've been making a
• 16:07
  Speaker 1: lot of investment on their own just in this so
• 16:09
  Speaker 1: that they can have a footprint when things get more
• 16:12
  Speaker 1: legal and accepted. Are you concerned about that competitive pressure? Oh,
• 16:17
  Speaker 1: I think it's all. I think it's great and I
• 16:19
  Speaker 1: think it's great for investors in the space today when
• 16:23
  Speaker 1: you have the operate, when you're when you finally see
• 16:26
  Speaker 1: UM capital pour into a market, that's great for share
• 16:29
  Speaker 1: prices and that's great for these businesses who, many of
• 16:32
  Speaker 1: whom have capital constraints. UM, so we look forward to it.
• 16:36
  Speaker 1: We also you know, we we love the fact that
• 16:39
  Speaker 1: we've got a nice head start, and so when when
• 16:41
  Speaker 1: there are new entrants in the market, we're ready to
• 16:44
  Speaker 1: compete with them. So, Steve, I know we're in relatively
• 16:46
  Speaker 1: early innings for the legalized marijuana in the US. But
• 16:49
  Speaker 1: what have you an industry learned about sales and consumption
• 16:53
  Speaker 1: in some of the earliest states that that legalized it.
• 16:57
  Speaker 1: You know that that that the biggest that the black
• 17:01
  Speaker 1: market tells us a lot about what consumption looks like
• 17:04
  Speaker 1: um and so estimates about the size of the black
• 17:06
  Speaker 1: market is what we hope to bring this market to
• 17:08
  Speaker 1: in the future. And what we're really looking to do
• 17:11
  Speaker 1: is have people transfer from the black market to the
• 17:14
  Speaker 1: legal market, and that tells us that there is a
• 17:17
  Speaker 1: really significant opportunity in the US. So interesting, So, Steve, why,
• 17:21
  Speaker 1: thanks so much? Steve as CEO and founder of Harvest
• 17:23
  Speaker 1: Health and Recreation based in tempor Arizona, giving us the
• 17:26
  Speaker 1: latest on the legal cannabis market in the US. Well, though,
• 17:45
  Speaker 1: certainly is a lot going on in the global oil space.
• 17:48
  Speaker 1: Most recently, the Organization of Petroleum Exporting Countries and ten
• 17:52
  Speaker 1: non members, including Russia, agreed to continue production limits for
• 17:56
  Speaker 1: another nine months. Oman oil Minister Mohammed all Roomy told
• 18:00
  Speaker 1: Bloomberg's Manus Cranny that he hopes the deal will erode volatility.
• 18:04
  Speaker 1: Let's take a listen. Hopefully it will erode some of
• 18:08
  Speaker 1: the volatility, and it will send a message of clarity
• 18:15
  Speaker 1: and removal of some kind of confusion and uncertainty. And
• 18:20
  Speaker 1: I hope time will tell, but I hope we have
• 18:22
  Speaker 1: achieved that. Let's bring in the next guest, Dr Ellen Wald,
• 18:26
  Speaker 1: President Transversal Consulting. She's also a nonresident Senior Fellow at
• 18:29
  Speaker 1: the Atlantic Council's Global Energy Center and a Bloomberg opinion
• 18:33
  Speaker 1: columnists out. Dr wall thanks so much for joining us.
• 18:35
  Speaker 1: Do you agree with the Oman oil minister that these
• 18:38
  Speaker 1: production limits may erode volatility in the global oil space. Well,
• 18:44
  Speaker 1: I'm not sure they're going to erode global volatility so
• 18:47
  Speaker 1: much as just keep things going the way they have
• 18:51
  Speaker 1: been going, meaning that we're not necessarily going to see
• 18:54
  Speaker 1: volatility from supply, but we are seeing a lot of
• 18:58
  Speaker 1: volatility on the demand inside and also volatility from geopolitical aspects.
• 19:04
  Speaker 1: You know, Ellen, I'm so glad that you're joining us today.
• 19:06
  Speaker 1: Why don't your perspective on Russia's role in these OPEC negotiations.
• 19:11
  Speaker 1: It seems like they've held kind of the main card
• 19:14
  Speaker 1: when it comes to determining how long the cuts will be.
• 19:17
  Speaker 1: How steep is that an accurate impression? That is absolutely
• 19:21
  Speaker 1: accurate with what's going on here. In fact, Putin basically
• 19:26
  Speaker 1: stole opex thunder by announcing at the G twenty that
• 19:32
  Speaker 1: he and Mohammed van Salmon had agreed to extend the
• 19:36
  Speaker 1: production cuts. And this was even before this was before
• 19:40
  Speaker 1: OPEC had met, This is before OPEC Plus had met
• 19:43
  Speaker 1: Um I don't even think that I'll follow, and Novak
• 19:45
  Speaker 1: had finished their their meeting before this was announced. This
• 19:48
  Speaker 1: was really putin kind of stealing the thunder from OPEQ,
• 19:51
  Speaker 1: and we definitely saw that reflected in the market, because
• 19:55
  Speaker 1: prices were up a little bit as the meeting went underway,
• 19:58
  Speaker 1: when everyone basically knew what the out home was, and
• 20:01
  Speaker 1: it's pretty clear that that was also due to just
• 20:03
  Speaker 1: very positive market sentiment coming off of the G twenty
• 20:07
  Speaker 1: and the meeting between Trump and President she Uh, and
• 20:10
  Speaker 1: then today we got nothing. In fact, if anything, oil
• 20:14
  Speaker 1: prices are falling, so it's pretty clear that the market
• 20:18
  Speaker 1: really isn't interested in what OPEC has to say, or
• 20:21
  Speaker 1: even what OPEC has to do. Well, we're seeing, as
• 20:23
  Speaker 1: you mentioned, oil falling again w t I crude off
• 20:26
  Speaker 1: about three point seven today. Just give us a sense
• 20:29
  Speaker 1: of where inventories are in the market. I think the
• 20:32
  Speaker 1: last time we spoke, we were we were over inventory
• 20:34
  Speaker 1: at the moment. Yeah, So it's it's actually a very
• 20:37
  Speaker 1: interesting question because it really depends on what kind of
• 20:41
  Speaker 1: measuring stick you're using to measure inventories. And um, the
• 20:45
  Speaker 1: last we heard about American inventories, it was a big
• 20:48
  Speaker 1: draw we saw from from the the e I announced
• 20:52
  Speaker 1: a huge draw. I think they were they do twelve
• 20:54
  Speaker 1: million barrels down last week and so that really helped
• 20:57
  Speaker 1: push oil prices up about four percent last week. So, uh,
• 21:01
  Speaker 1: now we're seeing them come down. At the OPEQUE meeting,
• 21:04
  Speaker 1: I'll Sally actually said, you know, we don't really want
• 21:07
  Speaker 1: to use this five year average that we've been using.
• 21:10
  Speaker 1: I think we should use the I think said the
• 21:13
  Speaker 1: two fourteen U five year average as a benchmark. And
• 21:17
  Speaker 1: then if you used as a benchmark, then there's an
• 21:19
  Speaker 1: overhang of over two hundred and forty million barrels in
• 21:23
  Speaker 1: the world. Wow. So Meanwhile, against this backdrop as they continue,
• 21:27
  Speaker 1: the OPEC members plus Russia continue to see reduced demand
• 21:31
  Speaker 1: and anticipate further cuts in response. We do have Saudi Aramco,
• 21:35
  Speaker 1: the state sponsored oil company of Saudi Arabia today UH
• 21:39
  Speaker 1: supposedly talking with banks to re engage and start restart
• 21:43
  Speaker 1: talks to have that initial public offering that some people
• 21:45
  Speaker 1: had said would reach two trillion dollars although many people
• 21:48
  Speaker 1: have said it's not going to be that big. Why
• 21:51
  Speaker 1: are they restarting those negotiations now? So that's that's really interesting,
• 21:56
  Speaker 1: And it's funny because the news broke right before the
• 22:00
  Speaker 1: pack a plus of a press conference happened, and I'll
• 22:02
  Speaker 1: folly this be at that press conference, and then he
• 22:05
  Speaker 1: was seriously wasn't there because he had some meeting with
• 22:08
  Speaker 1: the Austrian government. UH though I suspect he was probably
• 22:11
  Speaker 1: glad not to have to answer questions about that I
• 22:14
  Speaker 1: p O news. So, UM, what what had happened before
• 22:18
  Speaker 1: was that um A Ramco essentially suspended or they'd reached
• 22:21
  Speaker 1: the end of their a lotted budget for all of
• 22:24
  Speaker 1: these bakers and so they stopped paying them and and
• 22:26
  Speaker 1: so essentially that's what prompted this idea of the I
• 22:29
  Speaker 1: p O is on hold in reality. Once, once we
• 22:32
  Speaker 1: we actually got a look at a Ramco's finances from
• 22:35
  Speaker 1: the bond perspectives, you could see that they were nowhere
• 22:38
  Speaker 1: near ready to I p O in two thousand eighteen,
• 22:42
  Speaker 1: as the Crown Friends had originally suggested, and even in
• 22:45
  Speaker 1: two thousand nineteen there were nowhere near ready to I
• 22:48
  Speaker 1: p O. Uh, And now they're talking one. If you
• 22:53
  Speaker 1: want to IMPO then, especially if you want to impel
• 22:55
  Speaker 1: a company as big as a Ramco, they need a
• 22:57
  Speaker 1: lot of lead time for banks. So I'm not the
• 23:00
  Speaker 1: prize if they think they might want to do it
• 23:01
  Speaker 1: that they're starting to talk to banks again. But let's
• 23:04
  Speaker 1: see if they actually get them on payroll. So it's
• 23:07
  Speaker 1: interesting this on again, off again I PO of Saudi
• 23:10
  Speaker 1: ramcoll again. It could be the biggest I p O
• 23:12
  Speaker 1: of all time. But there is definitely some concerns here
• 23:15
  Speaker 1: about the valuation kind of what's the you know, the
• 23:18
  Speaker 1: valuation talk now is are they have they gotten to
• 23:21
  Speaker 1: that point? Are they still kind of using old numbers?
• 23:23
  Speaker 1: Where were in terms of valuation? You know? The real
• 23:27
  Speaker 1: the thing is there really isn't any There aren't any
• 23:29
  Speaker 1: real numbers at this point that that two trillion dollar
• 23:32
  Speaker 1: number was kind of thrown out by NBS, and it
• 23:36
  Speaker 1: was delivered in a way that actually made it seem
• 23:38
  Speaker 1: like it wasn't necessarily even talking about a RAM code
• 23:41
  Speaker 1: particularly was talking about the whole UM Saudi Public Investment
• 23:45
  Speaker 1: Fund so UM. But but we've kind of taken that
• 23:48
  Speaker 1: as this UM as this number for their UH for
• 23:52
  Speaker 1: their evaluation. But it will really depend on obviously the
• 23:54
  Speaker 1: price of oil whenever they do IPO, but also UM
• 23:58
  Speaker 1: they've basically assumed sabbag this massive petro chemicals company, and
• 24:03
  Speaker 1: so any valuation is going to have to include all
• 24:07
  Speaker 1: of these assets and to see whether their expansion in
• 24:11
  Speaker 1: downstream has added to their valuation. I'm not sure we're
• 24:14
  Speaker 1: going to get this two trillion dollars, not not in
• 24:16
  Speaker 1: this current atmosphere. But they may they may hit over
• 24:20
  Speaker 1: a trillion, which I think is not unreasonable. So just
• 24:23
  Speaker 1: real quick here, Ellen, I'm wondering where do you see
• 24:25
  Speaker 1: the next big move in oil up or down? I
• 24:29
  Speaker 1: really think that it depends on what happens with trade.
• 24:32
  Speaker 1: I think the the information the news that we're considering
• 24:36
  Speaker 1: more teriffs and Europe definitely sent uh, sent oil down
• 24:40
  Speaker 1: and um, but if we start negotiations with China, we
• 24:43
  Speaker 1: could see that moving right back up again. Dr ellen
• 24:46
  Speaker 1: Wald's thank you so much as always for being with us.
• 24:48
  Speaker 1: Dr ellen Wald, President of Transversal Consulting, also a nonresident
• 24:52
  Speaker 1: Senior Fellow at the Atlantic Council's Global Energy Center, and
• 24:56
  Speaker 1: a Bloomberg opinion columnist. Joining us from Jackson Fell, Florida.
• 25:01
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 25:03
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 25:06
  Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm
• 25:09
  Speaker 1: on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm
• 25:12
  Speaker 1: on Twitter at Lisa abram wits one. Before the podcast,
• 25:14
  Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio.