Oil Demand Hopes Crushed By Covid Resurgence: Again's Kilduff

is down two and oil is downward than three. Four barrel of w T I the perfect time to have on John killed off of again Capital John. Why is oil selling off so much today? One to punch here today, Lonnie, we have a sudden increase, if not full restoration looming for Libyan's Libya's oil production. They're going to be going up to his high as a million barrels a day, probably by the beginning of next month, if not sooner.

They're already at around six And this all this news about the coronavirus outbreaks um, particularly in Europe where there were rumors in the market overnight of France, Italy and Spain going back to full lockdown, UH, just really crushed the sentiment in the oil market. Because with with that kind of news, with those kind of developments, you know, we're just not going to see the kind of rebound

in passenger travel in cars and planes anytime soon. John, I know, Um and chatting with you in the past, it's all about supply and demand here. Everybody's got their supply models, everyone has their demand models here. Do you have a sense of kind of what's really driving the narrative here? Is it more then I constrained outlook on demand that's keeping oil where it is right here? Or

do you think there's an equally important supply discussion. Well, you know, we've we've been stalemated obviously around the forty dollar barrel mark for a good six months. So I mean that the arguments on both sides, I've been kind of fears and like I said, you know, you know,

pushed to a stalemate. I think there were it was a growing sent of hopefulness in the oil market, even as recently as a week or so ago, when we finally got a good gasoline demand number here in the US first, when that was near normal unfortunately nine million barrels a day. Unfortunately, we've fallen back again precipitously and now with this raised coronavirus situation, Um, the sort of hopefulness has been snuffed out, and um now we're gonna

sort of have to hunker down again. We thought, look, the Northern Hemisphere winter is the peak demand season on a global basis, all the heating fuels that you need to get through that. We I think there was a lot of sense in the market, a lot of hope in the market that that would help stabilize things and get us get the market a bit higher. It's given what we're seeing with the coronavirus, it's going to remove any of the additional demand that goes along with that.

Now we've got to keep our fingers cross and hope things get back to normal by next summer so that we can have a really strong driving season. If you if you're looking for the industry outlook to improve. How was it all messing with OPEC's fans, John, I mean, you know, I don't typically have feelings towards the cartels, but honestly, if there was any time to have a little bit of sympathy for the OPEC members, that would be Now I'm with you on that view, Vunny. I'm

never really rooting for them myself. But uh, and I've never rooting for higher prices either. It's just that there there's such a cob sort of feeling. But you know, this this oil industry, who I have a lot of friends and know and and you know, do you like very much? I mean it's been left for dead, um, But this is this is this is a terrific struggle

for them. Um. You know, they've they've cut back, you know, really as much as they can stand to, especially a lot of the countries that are struggling like a rack, who are dying to put more oil on the market, Russia to a lesser degree. And you know, they were kind of counting their blessings as you know, rough as this might be to say that that Libya was offline due to the civil war there. Now this sudden influx of another million barrels from Libya just really upbends their calculus.

And it's going to be a tough slog, particularly that oil sticks, because that's very valuable oil, very much desired in in central in Western Europe um, and it gets heavily marketed. So they're going to displace a lot of the other barrels that are that are in this market. So, John, give us an update on the US shell patch. How tough our conditions down there out there. I have one major oil CEO telling me this is the darkest period

in the industry you know. Ever, Um, you know they're they're struggling, and um, well you're seeing right now though, is sort of the seeds being sown to sort of rectifier or re constitute what's happening there. And you've seen several big mergers over the past two weeks now, Um,

and you know you've seen a slew of bankruptcies. So at some point here the production you know, is gonna has it has already stabilized from A from A and down from a much higher level, and that's going to feed into higher prices down the road here once things do recover, John, If you're trying to trade this whole era in some way, is there a commodity that you buy or that you'd short if in the complex if you want to energy, the brightest star on the board

right now is natural gas. Uh, there's a lot going for it there. L n G exports for example, have really ramped up again to pre pandemic levels. That's helping, as has exports to Mexico and UM again here too, we've seen that decline in production is going to be more and more constrained supply, particularly if I think if we get a Biden administration, a lot of the associated gas that gets flared or what have you is going to be curtailed, so that that's the brightest commodity on

the board right now. Beyond that, I think you have to sort of take a look at diesel fuel of a heating oil contract here, because one thing that has helped held up at demand wise is the over the road truck traffic. The jet fuel, know, but over the road truck traffic, uh, you know is probably the closest to normal we have of the several major categories, that being gasoline, jet fuel, and diesel fuel. John, you mentioned potential Biden uh presidency. What are the folks that you

talked to? How did they think that would play out? If that work to occur, what would that mean for the industry? Uh? The senses he won't be a complete disaster for the drilling industry or the fracktors for that matter. You know, it's it's become too big of a deal

for the US. I mean, one of the things but like to point out is that it was the Obama administration that approved or and permitted the export of US crude oil, which has climbed to let around three million barrels a day on average these days, which has been a huge right spot for the industry and really UH is propping a lot of the producers up. It's been really helpful, and China has stepped up. We are now China's number four supplier of foreign crude oil, so that's

have been a big development. The problem is going to be um for what I just talked about in terms of natural gas, the flaring um and the and the methane associated with fracking some of those wells, but also to what the Obama administration really went after where the refiners um and and the emissions there and obviously the Cafe car fuel standards. So it's sort of that end of the operation more downstream that will probably be pinched. But you know, we are oversupplied in terms of refineries

right now anyway, so um they won't be missed. Wow, it's an amazing state of affairs, isn't it, John, Tom, Thank you. Always fascinating to speak with John killed off right Paul. Yeah, it's it's interesting, really tough times for those American ship producers. It is a great pleasure now to welcome back to the program the CFO of Impossible Foods, David Lee joins us after another quarter of considerable effort

and work. So, David talk to us about why you guys are doubling the size of your R and D team over the next twelve Well, simply put, our investment in research and development is our highest returning investment. It's the source of the innovation behind the impossible burger. You saw us launch one point oh and then two point oh impossible Sausage, and now you're seeing us roll out

in retail in Asia. Really, innovation and technology is impossible food source for growth, and that's why we're doubling down on it. So David talked to us about how your business has been faring over this last seven eight months during the pandemic, How it's uh, how you guys have had to adapt. Well, we certainly, like everyone else, has been watching headlines rollout seemingly every day about this global pandemic,

and we certainly don't have a crystal ball. But one thing that's clear is we're following where the meat eater is going to buy meat. You know, of our consumers are hardcore meat eaters. The vast majority of our sales are being sourced people who want meat, and as a result, we've had to adjust to where they're going, which is increasingly you know, shipped direct to their home, which is why we launched our direct to consumer business as well

as frankly in the grocery store. You know, our grocery business is now up on x since the beginning of the year, where at fifteen thousands grocery locations across the United States and Asia, and we're still growing that business. So we've really tried to meet the meat eater where they where they're buying cool. Well, talk to us about the fact that you're not looking for meat eaters and you're also competing with many companies that are trying to

do the same thing now, including plant based companies. Well, you know, it's interesting about Impossible Food is that our core customer is the meat eater. Our mission is only achieved if meat eaters, like me and many others shoes and Impossible Burger made entirely from plants versus the thing from an animal. Um So As a result, our competition is kind of defined by our cust him or set. Our customers are meat eaters, and so our primary competition is meet from an animal, which is a one point

seven plus trillion dollar global business. There's plenty of room for great brands who are offering better products to compete. So so we don't really worry about a lot of those other plant based companies because it's a rising tide as long as the source of sales, for example, for US is from the meat eater. So, David, are you finding similar consumer trends outside of the US? I know you're in Canada groceries. Uh, you expanded into Hong Kong

and Singapore. Are you finding similar trends or any differences? You Know what's amazing about meat eaters is they love meet wherever they are. They make it bespoke and totally relevant for their cuisine and their culture, whether they're in Singapore, Hong Kong, Macaw, Canada, or the US. Um And so what we're seeing is because our products impossible beef meat from plants in Asia, for example, really appeal to the meat eater, we're seeing the same phenomenal growth there as

we see here. In North America. You know, our business in Hong Kong, for example, is up a hundred and fifty. It's up in Singapore and uh, and we're just getting going. So that's the thing about meat. It's nearly ubiquitous, and it transforms in the hands of one chef into a

very different cuisine than in the hands of another. And I think we're the only plant based company and Impossible Foods that has a product that actually transforms the impossible burger transforms in the hands of the chef, make it rare or well done, or a bowler or a dumpling, or about which is why we're excited about our global growth. What are your margins, David Well? One of the benefits of remaining private is I'm not yet in the business

of disclosing quarterly results. Can you tell us if you're profitable? I can tell you that it's a strategic choice to invest in the business. We make money on every unit that we make uh. And it's because we use a fraction of the resources of the incumbent industry. We just need scale to be out or below the cost of commodity ground beef and and people are willing to pay a bit more for our product because it has no cholesterol, less calories, you less fat, but all the protein and

the impact you want on the world. Um. So for now, I can just tell you that we were designed to be cost competitive in addition to tasting great. And we'll have to wait on specific figures until later when you expect to go public. Well, we have not made any announcement to be public through auspact despect which seems to be very fashionable these days, or through the direct listing right po. Um. But you know, we race one point five billion dollars of equity and our investors, including CO

two and CO slid horizons. These investors are sophisticated. They expect us to be operating as if we're public anyway. UM. So it's a strategic choice. It's one that we're not choosing to make today, but it remains an option for the company. So curious as to why you brought up the words back is, did somebody approach you? Oh? No, no, I I read the headlines that you guys felt right, and it's very clear we are all living in a

spack bowl market. Uh and uh. As a result, as a as any as any financial professional, wed I'm keeping abreast of the changing times. It's remarkable how many announcements seemed to be coming up every day about a new spac raged or a new spact. These fact consummated. Hey, David, thanks so much for joining us. We appreciate it. Always love to get an update on your fast growing business. David Lee, CFO of Impossible Foods. It's interesting, Vonnie, the

growth that they're seeing as a target meat lovers. Um. I thought they would target, you know, folks that don't care for me. But let's go to that big, big market. I would like to see the research on that pole, to be quite honest, I would I see where they're where they're targeting meat lovers and why and who told them to and what's the evidence that that's a better frame of reference than than plant based lovers. Yeah, exactly so uh but interesting growth story. There will be an

inching I p O when it does come. Well, a rough start to the week for financial markets here again, no visible movement on fiscal stimulus, and the numbers on the pandemic around the world going in the wrong direction. Investors trying to discount those new bit new items in the market. Let's get a sense of what's going on across markets. We can do that with Sarah pon Check Bloomberg Cross Asset reporter. Sarah, thanks so much for joining

us here. Kind of what's the feel this morning here? Um, as we start the week's trading, it seems obviously a risk off feel what you see in across markets, right, glad to be here, certainly a risk off field though you look across the major ravages. We have the SMP five hundred down nine tenths of a percent, the down down more than one percent. The NASDAC, though, is your outperformer flat on the morning, and as you mentioned, investors

are concerned with the resurgence of the virus. US reported a record new cases for a second day, adding more than eighty five thousand. We continue to see the rest surgeons in Europe with record cases in France and Italy. With that, we see the stay at home trade re emerging and that really asserting itself in the NAZAC out performance today. I'll highlight a few stocks if I look at the best performers in the Nasdaq as we speak, Zoom up three point nine percent, a m D higher, Amazon,

Docu sign Take two Interactive. These are some of your names that really have come to be known as your stay at home plays that stand to benefit in a quarantine lockdown restricted economy. At the same time, you look at your worst performance today in the s and P five hundred, many of your cruise lines, for example Carnival in Norwegian Royal Caribbean all down more than seven percent

at the moment. So this trade is clearly filtering through the market as COVID nineteen just remains the number one story. What really strikes me is oiled back well below barrows. So we have cl one which is you know w t I here in New York at right, So w t I crude oil has really been lodged around that

forty dollar a barrel mark. And when you think about oil prices this year, obviously the demand side of the equation is so significant, especially when we think about I mean I just mentioned cruise lines, but airlines too if they are not resuming activity, the effect that that has

on oil demand. At the same time, there have been some supply concerns to but certainly a daylight today when COVID nineteen is really affecting markets, when investors are once again considering the fact that this is a true risk. It has certainly not gone away. There are possibilities that we may see further economic restrictions ahead. What does that mean for oil demand and taking a hit? We see w T I crude oil right now down two point

nine percent and Brent down two point eight percent. Two Despite this risk off, feel Jack Moss plowing ahead with his biggest I p O ever just extraordinary. It is pretty unbelievable. And Group is set raise about thirty four and a half billion dollars through its I p O s both in Shanghai and in Hong Kong. So it's unbelievable,

going to outpace even Saudio Rampco. When you think about the value that this company is going to have, as Bloomberg highlights, once it goes public, it's expected to have a market value of three hundred and fifteen billion, So that is about the same valuation as JP Morgan in four times larger than Goldman Sachs. Imagine that. But consider the environment that we have seen. Sure, I'm going to bring it back to the United States, and we are not seeing an I p O in the US for

and Group. But if you look at the I p O E t F this year, so it's sicker I p O it is up seventy five percent in twenty a year that has been dominated by COVID nineteen restrictions, a recession. Uh, we have an election. There are many risks and uncertainties. The fact that you have newly public companies just soaring is really a sight to see and to put that sevent in perspective for you that since the I p O e TF has existed since is

would be the largest yearly gain. And those are your two other very strong years only gains and I say only a little bit sarcastically gains in the thirty percent range. So this will be more than double that. We're also saying other places where the virus is resurgent, lower slodacs in Germany down two point eight percent, they can forty down one point one percent, and you're not so much

London then just three tenths of percent. Right now, we really like, really weighing on German markets right now is s a p so that German software giant SAP down more than tw at the moment. And this isn't just a euro a German story. This really affects the outlook for equities around the globe, and I would argue that this is playing into the weakness that we're seeing today

in the U S as well. What happened was they cut their full year revenue estimates and they also said that a fresh wave of lockdowns would hurt demand through the first half of one. Now, think about what we are expected to see for the earnings picture for companies in one We're supposed to see a pickup again. We are supposed to see companies almost resume a sense of normalcy or at least be able to deal with the virus and get back on track. Well s a p

is saying that's not the case. They think that lockdowns are going to restrain demand and and their business prospects into next year. And that makes you really think, well, does that mean the E in the pe ratio doesn't mean earnings need to come down? For one, just as analysts are have started to really grow more optimistic. Essentially, we're gonna get a lot of tech earnings this week too, sir, Oh, yes we are. It's it's this is the busiest week

of earning season. So we're entering the third week fifteen trillion dollars worth of SMP market cap report this week, and I'll give you a bit of the rundown. Tomorrow we'll have Microsoft, A m D. We'll also hear from Fiser, Eli, Lily mark E. Then Wednesday we have MasterCard and Visa very large companies as well. But Thursday is going to be quite the day after the bell, Facebook, Amazon, Apple, and Google all the same time. Wow, Sarah, you're gonna be busy and we're going to see you back here

again tomorrow. Sarah pons act there cross us a reporter at Bloomberg News, covering everything from earnings to Chinese I P O, S, T E, t F S too oil. She can just do it all. As we approach seasons where you typically spend a little bit more money Black Friday, Halloween, Christmas, New Year's, let's get the retail take from somebody who knows a little bit about what's going on. And Craig Johnson,

CEO of Customer Growth Partners. So, Craig, you know, every day we're reading about more and more retailers that are shutting down, going at bankruptcy, disappointing their creditors and so on. What is the story out there with with with with just retail in general, I suppose, Well, you have to realize that UM retail has always been a UM a secor with ups and downs. And what happens when you're in a down mode like we are right now UM or a challenging mode. Uh, the weaker players are going

to get washed out. And that's what we're seeing. So the problem for many retailers is that over the past couple or three years they fail to uh right size. UH their store fleets with the demand. But now for many weaker retailers financially, UH, this has been a forced right sizing, which actually will leave the industry healthier. And for holidays, we're actually predicting that sales are going to

be up five. Really jumped out of me. I'm thinking just in a you know, the consumer here, we're still up ten percent unemployment, we are the pandemic numbers going the wrong way in most of the country. Here, what's underpinning your I guess I would say surprisingly strong five increase ever year. Well, the difference now is is that the growth is not based on uh tapping into home equity or charging up your credit cards the way it was some years ago, when whenever we saw a strong

retail growth. We're having very strong consumer fundamentals, and that's of robust five point four percent growth and disposal. Personal income UM wages are up UM eleven and a half new jobs have been created since the April nater of the of the COVID recession. UH and household balance sheet so the healthiest some decades. The FEDS household debt service ratio is its record low ever eight point seven percent versus a few years ago, and personal savings rates about

so consumers have a lot of money. Basically, it's like dry powder cash available for spending. Last, but not least, is that you look at the most recent UH retail sales period, which was the back to school period, which ended up a few a few weeks ago into September. We had forecast back to school sales We're going to be up seven excuse me, I'm going to be at three point seven and they ended up being up seven point five percent. Double are already optimistic forecast. The numbers

seem to be turning good. Where are you getting the data for households and for for personal spending and personal income and so on. It seems to me that you know, I'm sure there are plenty of households that have cash on hand out there, but is it a certain demographic

that that you're primarily looking at. Well, this comes out of the Promer Commerce, the Bureau of Economic Analysis and UH personal income data and just DPI data, um, and so those are the personal income in September was down two points present and we're looking in August I should say was down to that is sequential. What we look at is the year of a year, year of a year number is what what what? What gives it? Because retail works on the year of year bays Uh, it's

measured that way. Camps sales are not compersus the month prior to the card accomplished a year ago. So that is the relevant numbers UH for that and the FEDS Household Service Day. I see that's from that's from the Federal Reserve. So um uh. So constant households have money to spend. Now, there is clearly a bifurcation between the hundred and fifty million people with jobs versus the eleven

million people that don't have jobs. Uh. The filters will folks without jobs are spending only on needs, whereas the people that have jobs are spending on both needs and wants. And you know, obviously those those those folks are that that segment, that large sector of the economy of the consumer condo, what's driving the higher higher forecast Greig. How concerned are you do you think or how concerned you think retailers are that it does not appear that we're

going to get this additional round of fiscal stimulus. Um. Well, our our our forecast assumed that there would be the skinny package at some point before before holiday. And now whether that occurs or not, you know, we're not certain. But that's why we are base case forecast of five percent growth. We always bracket it with you know, scenario analysis. Uh that the high case scenario or six point nine percent growth in a low case is three point five.

So if there's absolutely no uh incoming a thing before the incoming federal ad before the end of the year, beyond normal unemployment, um uh, you'll have growth at the three point five percent that lower forecast scenario. Graig. Five all of that, who who are you anticipating we'll go

out of business between now and the end of the year. Um. We're not certain there's going to be any new bankruptcies We don't like to speculate on on bankruptcies as a number of UH retailers that are that are challenged, you know, in the department store sector, New and Marcus is still going through its situation, um uh, and in in apparel. Apparel and department stores are both still quite weak. UH sales. We've predicted down in the ballpark of ten eleven percent

year of a year. But I'm not convinced anybody else will go out, you know, with with holiday sales starting now actually they started last month, UM, that people will will extra right this point. Hey, correct, Thanks so much for join us. As always, we appreciate your insights into all things retail. Craig Johnson, President Customer Growth Partners. He

joins us on the phone from New Canaan, Connecticut. Again, they are looking for a five point five percent year of a year increase in retail sales this year based upon a liquid consumer Thanks for listening to Boomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Monnie Quinn. I'm on Twitter at on e Quinny, and I'm Paul Sweeney.

I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio