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Logic's O'Neill: Global Oil Demand is Underestimated (Audio) · Bloomberg Intelligence

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  Speaker 1: That's a Bloomberg business flash. This is taking stock with
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  Speaker 1: Gatlin Hays and Pim Box on Bloomberg Radio. This is
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  Speaker 1: taking stock on Bloomberg. I'm pim Fox. Oil. Oil prices
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  Speaker 1: down today about two and a half percent. New head
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  Speaker 1: of the Energy Ministry, the oil ministry in Saudi Arabia,
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  Speaker 1: wildfires in Western Canada, and conflict in Libya. Let's bring
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  Speaker 1: in Bill O'Neill, founder Partner Logic Advisors and expert when
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  Speaker 1: it comes to oil. Bill O'Neill, thank you very much
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  Speaker 1: for being with us. Can you just describe the US
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  Speaker 1: business first? Because I was reading your note and you
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  Speaker 1: talked about in bold face this decline in the total
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  Speaker 1: number of oil rays and I want to get too
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  Speaker 1: technical too quickly, but just to decribe what's going on
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  Speaker 1: in the United States for people. Well, we've we've seen
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  Speaker 1: an absolutely beyond dramatic decline in the number of oil rigs.
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  Speaker 1: But the interesting thing to him is that there has
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  Speaker 1: been so much efficiency created and they knocked out so
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  Speaker 1: many of the inefficient minds. The US output, yes, it's
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  Speaker 1: down and will continue to go down, but it has
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  Speaker 1: declined at a much slower rate than if you look
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  Speaker 1: at just those absolute rig numbers would suggest so, um,
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  Speaker 1: we're seeing lower US production, but not dramatic. We will
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  Speaker 1: see some further production declines and it will help at
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  Speaker 1: least off set some of the increases we're seeing, for
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  Speaker 1: example from from Iran and the continued avaricious production that
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  Speaker 1: we get from the slities. You mentioned avaricious production. Expand
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  Speaker 1: a little bit on that and maybe take us into
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  Speaker 1: this change at the top of the oil industry in
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  Speaker 1: Saudi Arabia. Well, it's very interesting in a sense, it's
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  Speaker 1: not a total supply surprise. Rather, we we had expected
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  Speaker 1: that Ali Alimi, who has been there seems like forever,
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  Speaker 1: would be replaced. Um. The new UM minister is the
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  Speaker 1: former head of a RAMCO. And keep in mind in
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  Speaker 1: the background that the Saudis are looking to sell off
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  Speaker 1: at least a portion of a RAMCO, So I think
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  Speaker 1: that's part of it. UM. Also, they wanted someone new
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  Speaker 1: with some fresh ideas. The new UH minister, his name
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  Speaker 1: is Khalid our Faith, is thought to be a bit
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  Speaker 1: even more hawkish than Naimi was as concerned sauty production.
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  Speaker 1: So what do you mean he wants to keep that
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  Speaker 1: market share. I mean that's what the Saudis have been doing.
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  Speaker 1: They've been doing everything possible to knock out the shale
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  Speaker 1: producers in the US, with as we just pointed out,
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  Speaker 1: some modest success. UH. He probably will be even more so. Also,
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  Speaker 1: I think he will be less likely to participate in
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  Speaker 1: the oil freeze talks that are coming up in early June.
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  Speaker 1: They had that first round that failed, uh Mr Alphae.
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  Speaker 1: This uh appointment appears to be embarished for that as well.
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  Speaker 1: So I don't see anything really constructive short term now.
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  Speaker 1: Longer term, I think the Sorties will want to get
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  Speaker 1: the price of oil higher when they go into actually
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  Speaker 1: selling UH Ramco. But for the near term they want
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  Speaker 1: to keep a firm hand, and that's gonna put a lid,
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  Speaker 1: if you will, on oil prices. Update us on Saudi
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  Speaker 1: Aramco and the plan to sell five PC. I'm sorry,
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  Speaker 1: I said again, just update us on the Aramco. The
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  Speaker 1: potential for a Ramco to sell five to the market, Well,
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  Speaker 1: it's there. They're looking to do it. I don't see
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  Speaker 1: it anytime soon though, but it's going to be something
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  Speaker 1: that will gradually be phased in. UH. It's a very
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  Speaker 1: difficult thing to do given the Saudi Arabia looking to
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  Speaker 1: sell uh something, but it's gonna happen, I don't. I
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  Speaker 1: don't expect it to happen the short term. I think
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  Speaker 1: the focus is still going to be more on the
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  Speaker 1: supplied demand equations as far as a suities are concerned.
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  Speaker 1: What is the supplied demand equation right now? Supply versus demand? Well,
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  Speaker 1: if you look at absolute supply demand, there's still considerable
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  Speaker 1: excess of of oil production is outstripping consumption. Now I
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  Speaker 1: do see some evidence. For example, today we've had some
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  Speaker 1: great figures out of China. While they're trade data in
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  Speaker 1: general was horrible, Uh, they increased their oil imports so
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  Speaker 1: that was a plus um and China appears to be
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  Speaker 1: doing some stockpiling as opposed to buying because of need,
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  Speaker 1: so we're seeing a little bit of that. So that's
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  Speaker 1: been supportive going forward. I think that may have run
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  Speaker 1: its course for a while, so that might not be
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  Speaker 1: as supportive. So I think sup I will continue to
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  Speaker 1: weigh on the market. I do think though the global
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  Speaker 1: demand is underestimated by the consensus, and that's going to
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  Speaker 1: keep prices a little bit steady. So we were lucky enough.
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  Speaker 1: I guess you could say back in January right in
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  Speaker 1: our Daily Logic Advisors comment that we thought oil had bottomed.
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  Speaker 1: No reason to change that view at this point, though,
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  Speaker 1: I would not be chasing the market. I think there
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  Speaker 1: are a few short term negatives as far as supply
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  Speaker 1: is concerned. Um, that could potentially because a little bit
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  Speaker 1: of a sell off. Also, the funds have gotten quite
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  Speaker 1: long here, so we could see a little bit of
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  Speaker 1: books square and come into the market as well, so
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  Speaker 1: people taking profits. Exactly last point to talking about natural gas.
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  Speaker 1: Natural gas, you talk talk about over supply markets, that's
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  Speaker 1: a that's a well over soul market. Demand is is decent, uh,
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  Speaker 1: but it's it's not that much above average that we
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  Speaker 1: could expect anything. That's another market. I think it's probably
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  Speaker 1: discounted the worst of the news, but I think the
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  Speaker 1: spot demanding question there is far more negative than it
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  Speaker 1: isn't in oil. So I doubt that we're going to
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  Speaker 1: see any significant upside move there. Good news for the
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  Speaker 1: consumer actually should be down the line, you know, regular gasoline,
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  Speaker 1: that that that the pump has gone up, but I
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  Speaker 1: don't think it's gonna rock it up considerably from current level.
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  Speaker 1: So I think, uh, the consumer is going to be
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  Speaker 1: in pretty good shape as far as energy is concerned.
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  Speaker 1: Will be a little bit of dinnertism. You at economy,
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  Speaker 1: Bill O'Neill, founder Partner Logic Advisors. That's very much for
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  Speaker 1: joining us. You're listening to taking Stock on Bloomberg Radio
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