Oil Pressure Is To The Downside, Ex-Iran: Kilduff

oil markets. We started the week with a lot of uncertainty, a lot of volatility about Mid East and geopolitical tensions. Brent crude at one point over this week was at seventy one and change. We've backed off pretty significantly from there as tensions have ease. Looking at Brent crude right now sixty five dollars thirty six cents per barrel, let's get a sense of kind of what's going on in the oil markets. We welcome John killed Off, founding partner

of Again Capital, based in New York. So, John, what do you make of the volatility that we saw in the energy markets this week. Well, things we're looking you know, very bleak there. On I guess Wednesday night, uh with the Uranian attack. Uh, you know, there was some misinformation around the market about potential casualties, if not fatalities, and of course you know none of that came to pass.

So that that's why you got the spike up, because it was you get yourself long some oil for protection as quickly as you can, and then it came off when our worst fears weren't realized, thankfully. So Um, the market has now shifted back to being more concerned about the relative oversupply in the market and uh, pretty weak guests lean demand figured out of the US in this week's report from the government. So um, back to more normal analysis for now. Yeah, for now being the key

word here, because I just should know. There was a little uptick, a little pairing of losses in the price of crewed after the press conference held by a Secretary of State Mike Pompeo as well as Treasure Secretary step minut To announced new sanctions on Iran, the possible re

escalation depending on how Iran responds. Is it telling that there has not been a bigger move frankly in oil throughout all of this, even the fact that there were actual missiles flying, right, I mean, it wasn't necessarily just as theoretical back and forth of words, things were getting heated. In another way, things were getting very heated. And I think the oil price at Lesa was off to the races the other night, um to the upside, because it

looked like there was going to be a real escalation. Um. And if Iran had gone further than it did, Uh, you have to figure that most slightly they're most certainly would have been. And finally, you know, real volumes of oil would have come off the market, particularly out of southern Iraq. That's uh, that's where my focus is. Iraq is proving to be the battle ground in this whole thing.

Unfortunately for those poor people and the Iraqi crude oil at a Bassora in the south, a couple of million barrels a day is the key element here that gets affected. Prices are going to go soaring higher. All right, John, Let's assume, and this might not be a fair sumption. Let's assume geopolitical tensions remain muted here in the near term to intermediate term. Where do you think oil goes here? Given a supply and the demand dynamics out there, it

just seems to be a lot of supply out there. Yeah, I mean x RAN. You're looking at at a steady sell off here now. Um, you know, we broke down through some key levels. Sixty dollars was key support. We went through that like a hot knife through butter. The next key level is just under fifty eight dollars of barrel. That's the two day moving average, and if we can break through that, we we could easily then go back to the October lows, potentially test fifty two a barrel.

Once again, the technical setup is such that the chart is a message. It got pretty much wrecked by the spike higher and then an immediate reversal. So there's a lot going against the bowls in the market right now. What about other possible disruptions forgetting we're on and I remember when we were talking about Libya being a source of concern. I remember Venezuela production was a concern for a while, given the infrastructure in that country and what's

going on there. All those things not on the horizon anymore. Well, the the issue we have, the market has is that even with the Ran and Venezuela pretty much offline, Iran is getting some crude oil app to China by the way UM. There there's still relative oversupply. The position of the United States, the ascendancyats to the number one oil producer in the world, and now UH a soaring amount of exports. We exported four point six million barrels a day UH last two weeks ago during that week, just

an incredible figure. And UM as a result of that, you know that the market keeps getting a sufficient amount of supply to the market, if not more than it needs. And there's still some cheating within the OPEC group, Nigeria in particular, and even with all the strife in Libya,

their oil keeps getting out. So with all of these serial issues UM in the Middle East, now with the rack and Iran and the attack on Saudi Arabia in the fall, the oil flows haven't been affected by any of these things, and the market remains relatively well supplied. So the market, the oil price UM is reflective of that. There's no tightness, no constraints, UH, just relative oversupply. So given that scenario, and given that, let's say you know, a a two percent kind of global GDP type of growth,

where does w T I go? Does it drift down close back to fifty that's what it's looking like that the growth outlook for isn't really enough to UH to support higher prices for sure. You know, maybe some stabilization if the Sattie's were decided to cut back more, But that is even in jeopardy, particularly because Russia is just

is about to bolt UH the agreement. It appears that they want to be allowed to UH fight for market share, continue with their investment capital plans that have been emplaced by their by their various companies UM, and operate on a more commercial basis. So um, Yes, short answer to your question is that it's a downward bias again short of a supply disruption that comes from an exogenous event,

I guess. Then the question becomes, John, how long before we start worrying about the financial health of shale producers which have been the swing players here. We've seen them do really well in terms of bonds and stock prices in the wake of the increase in oil prices. How far do they have to drop before we have to worry about their financial viability? Again, Well, they're definitely on the ropes and this is the year to watch them um.

And it's also the year potentially where the shale miracle UH drives up to a degree because as these weaker companies either go out of business or merge or get picked up by the stronger players, including these including the majors like Exxon Mobile. UM, then a new round of production discipline could befall the industry and that sector where we would see a decline in US production uh instead of the rampant and unbridled growth that has sort of

been the business model in that way, so UM. That would also potentially help to stabilize prices down the road, but it's not going to be really uh an impact on prices to the upside this year. Thank you so much for being with us. John Kilduff, founding partner of Again Capital, based in New York, talking about the different factors that are pushing and pulling on the price of oil.

Bart van Arc, chief economists at the Conference Board, joining us now and you did this annual global CEO survey and among the points made here, attracting and retaining talent ranked as their top internal concern. If that's the case, why our wages not going up more? Yes? Hi, good morning these I H I mean that's uh, that's I think the conundrum here, right, I mean, we see this continuous slow age growth and at the same time we

see companies, uh, we all complain about talent. It's a very highly bifurcated labor market, right, I Mean, on the one hand, you know, we see CEOs and spee suite leaders in our conference board see suite sure of a really put these issues of attracting and retaining talent, how to develop a next generation of leaders in order to move innovation forward, in order to make that company's more productive,

improve their performance. And on the other hand, there's just lots of junctions and occupations out there where there are still plenty of supplying the labor market. See pretty strong job growth throughout two thousand nineteen and in two thousand twenty, and there are people. There's still plenty people being added to the labor markets, so neat for companies to raise wages there so part the labor market remains strong, which

can be a challenge for corporations. What is the number one risk your survey came back with here in terms of the CEO serving Yeah, so there's a s sweet survey by the conference word was done in September October last year, So at that time, I think there were big concerns about where the economy was was heaving also in the United States. Don't forget we were in the middle of the trade disputes at that point in time

and potensial threats of raising tariffs. So recession risk came up pretty consistently among the suit leaders as their biggest concern going into two thousand and twenty. Now we're a few more months down the road. You know, we we have a trade phase one deal coming along we all hope very very soon. So you can see that has

helped um businesses become a little bit more confidence. Earlier this week, the word releases CEO Confidence indexis is a quarterly index, and CEO confidence has been going down for about six quarters in a row, but in the last quarter it actually began to pick up a little bit, still less than fifty, so we still have more negative CEOs than positive CEOs, but we're beginning to see a little bit of recovery of confidence. So in that sense, I think they may be hoping going into a slightly

better two thousand twenty than two thousand nineties. So this recession risk has received somewhat okay. So and this is important, especially because as one of the points that that your survey found U S C e O S said that a recession was their number one concern in and that

had been their third biggest concern back in. I do want to go back to the labor issue and this idea of the bifurcation in the market where you have skilled and sort of educated workers who are in you know, in well demand and they're able to demand their their salary as they as they will, or have more bargaining power versus the lower end. Can you talk a little bit more about what companies said the color they gave

around the talent shortage that they face. Yeah, it's interesting to see where these shortages are, and we see a lot of these shortages in sort of more blue color type workers, so manufacturing workers and eng years. We of course know a lot about the stories about truck drivers and train drivers and so on, and these are all kinds of jobs occupations where basically people were told at the time, you know, don't even go there because you know it will be all automated. And we have you know,

driverless trucks and everything else to all be robotized. And now here we are in two thousand twenty, and we're seeing that, you know, a lot of people in those occupations are all the people are now beginning to massively retire and the technology hasn't really proceeded as rapidly, so now we suddenly have a shortage because there's too few

young people coming into those kinds of occupations. So what you see in this CEO survey is that people that that that SCRET leaders are saying that, you know, things like an innovative culture in that company, you know, dealing with these kind of disruptions of technology. They feature very high on the list of their concerns, so so they are more aware than effort that I need to deal

with this. I guess I'm really struggling with this, and I'm sorry that I'm basically asking the same question again. But if this is not a training issue, why can't you find more people to hire by just offering more pay. Well, in a way, it is a training issue in the sense that you know, you get people out of school who don't have these skills yet in order to deal with those new technologies. So it's just very hard to find people who companies are comfortable with that they can

really sort of get them up to speed. So a lot of people with lower skills can easily find jobs in the services sector of the economy, but these are those specific skills that need to be trained within a company environment where there's a huge shortage off. So so creating an innovation culture and creating a culture in which people can improve those skills I think is one of the real shortcomings here. Bart van Arc, thanks so much

for joining us. Bart van Ark, chief ECONMIS for the Conference Board, based in yr City, giving us his thoughts on the global CEO survey. Following up on those jobs data, time to check in with Bloomberg Opinion. We're joined by Opinion Commerce Alex web covers our Things European Technology, joining us from London. Alex thanks so much for joining us. We're seeing in the home food delivery business some consolidation going on across the globe. It's actually coming to the

U S as well. What's going on so in Europe and in parts of Asia, we've really seen the number of online food delivery platforms reduced. Has been a series of mergers and in the UK we've basically got three now. In South Korea they have two and likely to go down essentially to one, and Germany already has just one.

Now in the US, you've got four. You've got um, grub Hub, door Dash, Postmates, and uber eats, and frankly, there is a lot of competition, which is making life hard because they are all trying to out discount each other. Now yesterday or day for yesterday, we had the Wall Street Journal reporting that grub hub was evaluating it's um uh strategic options, including a possible sale, and you know that would really herald a big move that we've not

yet seen. In the States. We've seen a couple of smaller acquisitions where you know, players with one to three four percent market share have been gold up by one of the bigger guys, But the bigger guys themselves have largely, for the past to three years um stayed in the situation they're in. I'm gonna ask a really crazy question, Alex. I know this is going to be it's going to be a little mind blowing. Can this business make money? Personally, I think it's very hard to see how, at least

in the recent iterations of online food delivery. There are two business models here. The first one is that you are literally a platform in the truest sense. You you are a website or an app which connects the person trying the dinner with the restaurant. Now the restaurant then takes responsibility for delivering the food with their own careers.

The second one is what we've seen with uber Eats in the US and door d our and in Europe in London with companies like deliver U. Those companies own the networks of couriers, and the first model, where it's purely a platform, is very profitable. They grub Hub was built around that model and has existed like that fifteen years.

It had EBITDA margins of more than twenty the like the other guys owning their network and careers, have never been profitable, and the path to profitability isn't immediately clear. It certainly isn't clear they gonna get there any time inside the next two or three years. I really, I just want to bring you some headlines just crossing with The US is set to impose sanctions on Iran's metal exports as well as the nation's leaders. They are expecting

to unveil these new sanctions today. We are expecting a press conference with Mike Papeo and Stephen Manuchin. So they will be I expect speaking more in detail about that, and we will bring that to you live pol when we get it exactly. Um Alex, you mentioned kind of the Uber model, the Uber eats models. Even you know, among Uber investors, there's a lot of pressure to get out of that business. So boy and and they have such huge scale, So that suggests that that model may

never be profitable. It's certainly hard to see how the guys in the space tend to make the argument that what is now a food delivery business becomes every delivery of everything. You know that you are delivering to ues with toothpaste and groceries and clothing. You know, Postmates has an agreement with Old Navy to deliver a fashion But you know, volume doesn't necessarily account for profit, unless, of course, you get to the stage where you're ordering televisions and

you're you're taking a cut of that. Then it becomes a little bit more easy to you know, to to justify the expense. But you know, is a guy on a scooter going to be delivering a television probably not? Um. The thing the kind of sticking point with grub pub potentially being up for sale. The most ideal or the ideal combination would be with one of Uber Eats or

door Dash. And the problem with that is that the biggest investor in both of those companies, Ubeats and door Dash is soft Bank, and as we've seen with soft Bank around the world, they prefer to have their portfolio companies combined with each other. And I can imagine a scenario where Um, door Dash, and Uber Eats. Perhaps Uber carves out that eats business and lumps it in with door Dash. Then you've got three competitors in the space.

Soft Bank is only back in one of them. So Massas on the head of that business, is very happy and it leaves door Dash. Sorry, it leaves grub hub with a greater competitive threat. Just to be clearer of what the news, as grub Hub was reported by the Wall Street Journal in New York Post on Wednesday that it was considering a potential sale, Grohub has come out and said unequivocally it is not running a sale process,

so denying those allegations and those reports. Still though, there is a question about profitability, and ultimately, you know, people talk about the Ubers of the world and they say, well, if there's enough consolidation amongst some of these rides sharing and these is a driving services that they will be

able to jack up prices. And that's the big question with these delivery services, right what kind of pricing power do they have even if they have the entire market, because people can do the alternative, which is go out their front door and go get their food themselves exactly. That that that's the huge question that you know, if um, if the answer is you only have one competitor in a given market and buy a market I mean the city of New York or the city of Chicago or London, um,

and you can one up the prices. Well, I think right now, you know, one of the reasons people use this stuff is because it's cheap. And the reason it's cheap is because they're competing against each other and so therefore they're subsidizing the costs. And yet to your point, the moment that it becomes less affordable than just cooking at home, are people going to try to do it? As we've sort of going to continue to do it.

And you know, people are pretty fickle, um. You know, brand loyalty in things like ride hailing or food delivery platforms isn't great and um, the moment that a cheaper product comes along, they switched to it. The one caveat I would also raised to that statement today from grub hub the report on Whens. They didn't say they were running a sales process. It said they were evaluating strategic options. So I don't think it completely leaves them some wiggle room.

In some ways, it kind it looks like a non denial denial. They're denying something which wasn't quite reported. There isn't It wasn't reported there's a sales process. It was reported that is something they might be considering. So are there I know you've looked at this space holistically. Are there any markets out there, any countries or any companies that are doing kind of the platform where there actually

are delivering the food on a profitable basis. Yes, I mean in Germany takeaway dot Com, which is in fact a Dutch company. Um, take away dot Com essentially has a monopoly there. Um they had market share, which prompted the only other player in the space delivery to leave. They have a sort of hybrid model where maybe twenty of their deliveries, Um are you know, service by their own careers UM and the rest the restaurants delivered themselves

and so they are able to be very profitable. They have literally in the past hour secured um the shareholder approval to buy Just Eat in the UK, which has a similar business model for a figure about x billion pounds. In the UK, it's a bit different because of course

there's also competition from um Uber Eats and Delivery. But in Germany, you know, huge market, a lot of growth potential still and they don't have that that competition from the the owned courier model, so they have the ability to jack up prices to the extent they think it's possible, but also eke out some help some you know, generous profit margins because they're not having to account for the

cost of the couriers. We're talking with Alex Weorb but European technology calumnist over in London for a Bloomberg opinion. And one of the reasons why this particular area, this industry has been so interesting is because of heart it's gotten in terms of the money poured into it. Door Dash is planning an initial public offering for this year. We shall see whether they will be able to pull

it off, especially without proven profitability or a path to profitability. Alex, I just want to wrap this up and put it a bow around it. You mentioned soft Bank and how they own a bunch of these companies. How much has soft Bank singleheadedly inflated the valuations of the entire business

model here of delivering food I mean significantly. So the grubhub was the dominant player back in seventeen, had more than market share um soft Bank started pouring money into door Dash, and then Uber, which was soft Bank backed, started expanding um It's Uber Eats offering, and needless to say, now we see door dash is the biggest player in the US with something like thirty seven per cent market share compared to grub hubs, and that is all down to the fact that um it is burning through cash

to provide food and affordable rate to end customers. The best estimates from last year, I think the Information reported that door dash was set to make a four hundred and fifty million dollar loss on revenue of only about

a billion dollars. So you know, if it didn't have cash from not just soft Bank in their case, there's Sequoia capital in there as well, but certainly from venture if they didn't have venture funds in there, then they would not be gobbling up that market share and and reforming, reshaping the landscape, gobbling up the market share. If you will, Alex Webs, nicely done there. You're a Vian technology columnist or Bloomberg opinion joining us from London. Thank you so much.

You can find all his columns and all Bloomberg opinion columns at opi and go on the Bloomberg Bloomberg dot com slash opinion. Well, there was another M and a deal in the healthcare space today, Eli Lily buying dere Myra, a maker of treatments for skin conditions, for one point one billion dollars. Shares of Demira up five point eight percent. Today stock is up one and sixty percent over the

trailing twelve months. Help us walk through the deal. We welcome Patrick Johnson, Senior vice president and president of Lily Bio Medicines UH. It's based in Indianapolis. Patrick, thanks so much for joining us. A pretty interesting deal for Lily. Tell us a out why you're buying Derra. Well, thank you very much, and good morning. Yes, this is truly an interesting day for both Lily Darbyra and for patients

suffering from a topic demmatitis. First and foremost, we believe this is a very good fit with the commitment that we have to immunology and particularly dermatology. As you know, Armira is a biopharmaceusical company that is dedicated to a chronic finely medicine to chronic skin conditions, and based upon the Phase two data oblibric Ki is a mob We really believe that this is potentially a best in class

medicine for treatment of a topic demmatitis. I have to wonder how much this also emphasizes the role of aesthetic treatments and sort of how popular they have been and how much of the drivers they have been in profitability for the pharmaceutical industry while other sort of drugs have moved towards generics and sort of requirements have been more regulated and less profitable. How much is that plan well, I think, first and most importantly, this is an area

of huge unmet medical needs. Still, if we look upon the field of atomic a topic dematitis, it's currently estimated that eighteen million Americans are suffering from a topic dematitis. Out of those, ten million or suffering from moderate to severe a topic to amatitis, and many people say that this field where has been not any significant development, and we are today with a topic dematities where we were

in the field of soiasis fifteen years ago. So I think my response would be we, as an research and development based company with oven one hundred fifty years of independence, whenever we do what's right for people, who will also do right for business. So Patrick, I know that Sonopi also has a product in the market to pix and

I think is the name of that. Is this a head on competitor to that, Well, we are really really excited it with the Phase two data from from libritism and what we saw was a very good fication on skin, but not only a fication on skin. Most importantly, we saw an opportunity to differentiate positively also on itching. And itching is for those who are suffering from a topic talimatitis very above some symptoms. It has a significant impact on sleep and a significant impact on quality of life.

So therefore we we believe that we might have a medicine here that can bring a lot of hope to those that are not fully fully getting the needs met with the current available treatments. But Overall, I think in this very important field, it's important to have many different medicines available and for the healthcare providers and for the patients to have several opportunities. Patrick, to your point about several medications available. Certainly for the patients it's helpful to

figure out what works best for them. For the pharmaceutical companies themselves, it's helpful to rely on a number of different drugs in order to diversify income streams. Are you hoping to develop more more drugs through R and D? Are you looking toward more acquisitions? What's the game plan

going forward? Well, we have made it very clear that we we believe in in organic development and research and development based over of our own laboratories, but we will also augment those efforts whenever we see any opportunities in those cortices areas where we have made a commitment. And Armida was such a perfect fit because they share the commitment to immunology and particularly chronic skin conditions as we do. So we will always look for opportunities to augment our

internal OR and D efforts with external business development. Patrick, I see the Starck price above your offer price of eighteen seventy five starts trading in nineteen forty cents, do

you expect a counterbid? We strongly, strongly believe that we have been providing both a full and a fair value of dar Mira, and we have thoroughly assessed this, and I think it's important to go back and also look at the sixty days volume weighted average stock price, and you can see that very is a premium of close to use of that price. So again, we really believe that this represents the full and the value of the ARMERA.

Just looking forward to a lot of people talk about biopharmaceutical industry as being very much in focus as we head into the elections. How are you sort of prepared to handle that? What kinds of questions have you gotten from investors? But I think we have made it very clear that we are focusing on on unmet medical needs, and we made the commitment to bring twenty new innovative medicines to two people across the globe starting in fourteen.

We are more than halfway through, and I think as long as we're making that bet on innovation in areas un met medical needs, the investors have been reacting very positively. But most importantly it brings a lot of hope and value to the patients we serve. Hey, Patrick, thanks so much for joining us. I know it's a busy day for you, given your acquisition today del Meira for one

point one billion dollars. Patrick Johnson, senior vice president and the president of Lily Biomedicines for the Elily Company based in Indianapolis. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. M Paul Sweeney, I'm on Twitter at PT Sweeney. I'm Lisa abram Woit's I'm on Twitter at Lisa A. Bram Woits one before the podcast. You can always catch us worldwide on'm Bloomberg Radio.