tv The David Rubenstein Show Peer to Peer Conversations Bloomberg October 28, 2018 11:00am-11:31am EDT
>> saudi soil pledge. caterpillar craters. the market. the big industrial raises questions on profitability. earnings from oil services. the big turnaround. when to fix brs after 57% selloff this year. i'm alix steel. welcome to bloomberg commodities edge. trading behind the hottest commodities and the smartest voices in the business.
first, spot on. our take on the big story. spotlight is oil really bad week. hovering near a two-month low. the energy minister promises the country will pump as much oil as needed. ceiling oflifted the countries that produce as much as you can. production back so that we don't have the anxiety that existed in the middle of the year. >> joining me is the global oil analyst. good to see you. we had that. a couple days later we had the opec cutting in 2019 because of oversupply. what did you learn? >> you learn so much from these guys. number one, they seem to want to send $80. now want to go too far over. at one point, we were pumping all out. now, we think we should pump little less. >> they want to defend 80.
how is the khashoggi affair and relationships the u.s. and turkey and iran help or hurt? >> in the longer run, there is no way this is good for the kingdom. this was a guy who was on the front page of time magazine. he was fettered as the new reformer of a kingdom that was stuck to a one trick pony. is now going to be this multidimensional, new modern economy. to practice it like this, you cannot have american investors >>. you have -- saying basically they want to pump about 12 million barrels a day. the ceo says they want to do that for the longer term. when can they do that? how much money do they need to do that? had somes where he fantastic stories. so, on monday, we are doing everything we can we are all
going all out. 10.7. all you can do. then, we hear three to 40 billion. another building -- billion barrels of capacity. from what level? how -- what is the level? >> if you talk to me about spare capacity, you have to give it to me and 30 days and to it for 19 days. when in history has he done anything more than 10 six? >> never. never for more than two or three months. 90 days. as theirke a top-level real capacity. every time they are below that you have spare capacity. you go, you go to 10 seven. you need time to drill. how many billions of dollars. we think that to have room to aill another billion barrels day, easily, if you search. you don't ever want to search if you are commercially invested in a field.
your geo engineers don't want you to do that. you can do that with one of those an issue. the strait of hormuz. violence or war type security if you will. not commercial spare capacity. commercial spare capacity to drill. how much do you need to drill? a couple hundred wells in geneva. all the other fields. they have plenty of capacity at the surface. because was surprising when the headlines hit a use the oil price off 5% on that day. if you take a look at than what happened to -- it went into contango. will be lowerh than the back month. does that reflect your view?? >> it sort of kind of does not. you can't say that in the fourth deficit ofere is a supply. and have the front of the burn spread collapse the way it did.
creating a wave of supply that is probably coming from the saudi's. it may be all of the iranian oil of the market. that means you have a temporary glitch, if you will. is what we think it is. a temporary glitch. washought that what he said a pretty bullish comment. everybody has gone max. somehow, that is bearish. how is that bearish? when you havecapacity. of market is in an episode glass deciding to be half-empty as opposed to have full. all sorts of other factors. >> great point. great point. but get your take away. iranian sanctions will have a big impact on the market. the cushion of the affair is a turning point. in 2019, global growth depended fine glass is half empty. great to see you again. of cornerstone macro. up, exxon mobil hit with
a lawsuit over the financial risk it faces from climate change. that story and, as we had to break, the big commodity move of the week. palladium hitting an all-time high and growing political tension between the u.s. and russia. one of the top producers. stimulus in china. a key consumer. step money piling in. this is bloomberg commodities edge. ♪
--- commoditiesloomberg edge. time for the debt headache. we don't deep into the market trends of the week. the oil inventory numbers kind of a mixed tag. crews stocks build by 6.3 billion barrels. everything else, including the sbr actually true. mac moran and copper and gold say the physical markets are tight. sentiment is bad. you can really see this refracted in the chart.
this is free be available copper inventory. the lowest since 2005. more demand actually rose. a week away from the u.s. oil sanctions against iran. farmers don't seem to be cut in that. president trump blasted president rouhani for demented words of violence. americanetric tons of soybeans have been headed to iran. despite the broader tensions between the two countries. let's dig deeper into exxon. attorney general barbara underwood sued the big oil company alleging emails show that it had been lying to investors for years. about how much climate change will affect its business. let's bring in bloomberg sustainability editor. what were the charges? >> the charges which were filed suggest security fraud. exxon mobil basically had two sets of books. they had a public carbon price, which is an estimate of how much
climate change is going to cost them in the long haul, but for actual internal planning, and investment in projects and they had a much smaller number. a much smaller estimate of what climate change :00 -- will cost. that is what the united states alleges. >> vigorously saying it was unfounded. we have seen this type of lawsuits come under -- come a much higher over the last couple of years. why? >> part of the reason is frustration among environmentalists with the slowness of the u.s. federal government in states to address climate policy. even for some activists on the left. obama era regulation which is now sort of slowly being peeled back. not go far enough to help america reduce its carbon emissions. sometimes, we saw it for years with tobacco. i have seen it with other social
issues. frustration with the normal political process, legislative and isaac -- executive branches can lead people to seek remedies , creatively in the judicial branch. in the last couple years, we have seen cities, states, and a broad, nations use courts to try to demand action from companies or governments on climate change. this is a novel one to because it focuses on security fraud sued by new york city, san francisco, oakland have been thrown out pretty readily by judges. because the judges have said that they are -- the plaintiffs are trying to do the legislative branches work. >> much more to come. think is a much. let's get into the ring. covered from all angles. david in houston i oil services. let's kick it off with howard burton. the company calls for the bottom
yet again and oil services. they have done it up -- done it before. is it real the sign? ? -- real this time >> you can look and the future another pipelines will's that will open up by a certain point. there is the feeling that you know when activity will return as opposed to when you hit bottom and you're not sure when oil prices will rise again. this does feel a little bit different. >> it gave some point as to why the emts will -- let's take a look. drill down into which is the most likely timeframe? comee most likely would eagle furred and balkan. two of the biggest shale glades. permian, not until later on. marsalis may seem -- see some rise sooner. you will see other places in the u.s. before you see permian. >> this time it may really be
different. hasfirst big oil company that takeaway. what was the big one for you on this? >> the mantra used to be drill baby drill. this is when the mantra will be discipline. a billion dollars. a big move to signal -- signal that it will not go crazy when prices go little bit higher. they kept it almost/. they would be disciplined and they weren't looking at the didn't >> to lower 48. -- talked to bloomberg. here's what he had to say. >> we continue to take good care of our cash. to projects.ority we have a very strong project. thelso like to see strengthening of our balance sheet. that is a priority. we have indicated that --
the scope for that is emerging. we would have to be included in among other conservations as well. >> are going to hear that from chevron exxon next week? slightly different case they have been hesitant on buybacks. explaining how they will get that money back to shareholders. this will be a quarter where you see better results than a year ago. the question for most investors now is what is the ceo going to do with the money? hopefully, investors return it to them. the big stand up this week was caterpillar. what triggered the deep selloff that we saw in unbelievably bad week for the equity? >> i think it is mostly about market psychology. the stores and society in market rent out. given that this is a company that services the mining industry and construction, it is so linked to the global economic pictures. have any concern about the global economy, especially after the imf, caught
the global growth forecast, then it is making investors jittery. that is what people are exiting. its best quarterly profits since the third quarterly pocket in history. >> really ignoring the positives on the quarter. the cfo did say a company with a $50 billion top line, you can't grow that fast forever. it is not feasible. it becomes of the mass in the end. is it just the numbers and mass or is there a fundamental global growth issue that commodity world needs to take into account? >> if you go by what the company is saying, they are not seeing the impact of the trade war and all this concern about china. if you look at the financials of the company, this is a company justhas grown sales by 35% a few quarters ago. it is lending to 31%. the previous quarter is 24%. now, it is just 18%.
you clearly see the slowing. the company says they have not reached the end of the cycle yet. for investors, they want to be in a company that has greater outside than that. people are concerned. if there is a big caterpillar, that is the big question. >> thank you so much. we have david -- david wherry and heavier. thank you very much. for our note of the week. bank of america's golden call. equity markets selling millions of change in focus may soon shift to america's twin deficits and china's month -- money easing. golden triplets to over $1400 and 2019. coming up, it was a terrible year for the brazilian chicken. we will talk about the company's plan. next on bloomberg commodities edge. ♪
steyer. a war of words and award of million dollar bills. bloomberg the in-in washington. what is this about? >> >> it is about money. it is about dirty words. a couple parties exchanging some hot rhetoric. spending a lot of money to back up their words. >>? what are they fighting over >> the voters in arizona have been asked to -- to take effect in 2030. the main utilities in the state oppose that strongly because they have a lot of embedded assets that don't use renewable energy. you have got these two irreconcilable forces teed off against each other. >>? what money is at stake? it is tremendous. who is going to have the upper hand here? >> stutters organization has been outspent by the utility organizations.
22 million versus 19 million. both parties are throwing a lot of money into this race. far, looks a low bit in favor of the utilities. utilities say that you can raise the cost is going to add to resources like battery storage. gas plans. solar power. they're worried that increasing costs. how widget is that argument? >> they are talking about renewable generation. the cost in arizona would uniformly be lower than adding new generation of any form. >> thank you so much. and exciting election day for sure in arizona. let's turn to commodities in chief. one executive in the commodity world. today is the ceo of b after it first, a closer look at the company. be rf is the world's third
biggest chicken producer. the brazilian company had a bad year. stock is down 50%. debt has sold off. it was the perfect storm. russia is -- instituted a ban on brazil. europe says certain plans and brazil could no longer export to the eu. tariff ondumping chicken. went through for ceos in the last year. and, it has lost investment grade credit rating. the coming brought in a fixer. he does not like the title but after 35 years in government he has a reputation of heating up companies. issaid the of the mystical $1.2 billion in asset sales this year. debt and inventory reduction, and reversing a margin drop in 2019. helping the company inch toward profitability. he is getting ready to pass the ceo reins over to coo in june. once they get their house in order, how does it grow? >> i recently cut up with him and he highlighted three growth areas. brazil, hello market, international.
i asked him what his plans are. brazil is 50% off volume. the backboneto be of our operation in the sense -- and thel not see consumption and brazil coming from external shocks. as we have seen in the last month. to sustain our leadership and brazil. to increase the volume of sales and brazil. the hall all market has a very good position. more than 30 years. we need to consider data position considering the initiative that are been taking by the local government. clearly see that, especially
in the gcc area and in turkey. and in the international market. -- distributing our process. and havingal basis the sense that we have read in the hpcc and in turkey. >> what about internationally? >> if we are talking about international beyond the halal market, we are talking about china. talking about looking very carefully on vietnam and the countries that are having internal, good internal market wille see that today we increase the consumption special for chicken. >> going profitable?
>> one of the things we want to see increasing margins starting next year. , so far, especially, last year, not a very good year. we want to see the company back in historical levels of margins in 2020. -- we really want to have the margins of both the historical levels. >> if you want to get more exposure to china, and brazil has its own political difficulties, how exposed do you feel to geopolitical risk and how, as a ceo, do you think about that? >> the main risk is protectionism. , as ad we have seen mentioned before, a multiple number of different initiatives that are clearly protectionist.
the concernreally we have. this is why we need to work according to the circumstances. investing in more local production and local processing of products. >> does my interview with pedro. haverford a few be rf executives to federal prosecutors. in investigating and if you'd safety standards. open its own probe into the allegation. it says it is cooperating. here is what is on my commodity radar. sunday, round two of brazil. for will be the result producers of soybeans as well as corn and sugar? monday, theanies on 940 $9 million bond payment on notes that are due. expectation is they will be repaid. the initial payment passing
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