Surveillance: Citi's Morse on Oil Downgrade

financial crisis of two thousand and eight. Why are we seeing oil prices getting a bit of a bid today? Why are they having a lift? Why are they slightly up? Because the thing was so bad? But what is that really pricing it in? I mean, last week was not a blood bath. Last week was the sell off, but it was not less because not just apeople don't know what to price in. They don't know how long this will go on for. They don't know how much worse it will get. Let's ask the economists what to do.

John Riding bring capital chief economic advice that you want to get around the table here in New York. Good morning to John, Good morning Johnathan. What do you tell clients? Well, look, what has to train I think recognized. First of all, the coronavirus is it's like all illnesses. It's terrible. It's spreading rapidly. Um. But one has to put it in perspective.

So what what is it analytically? And I've argued that it's more a supply shock than it is a demand shock, at least for the rest of the world that we have integrated global supply chains. We had a shock to the supply chain last year from tariffs in the trade wars. Um we got that behind us, and now we have a uh supply chain shock coming out of the factory stain closed, which is a Chinese decision in terms of limiting the spread. Then of course us to the travel

band and soul. But if we go back to looking at stars, it will, no doubt we got under control with that. The timeline in the case of stars from who are declaring it an international mergency I think was that March thirteenth, two thousand three too, being sounding the old clear was in July of two thousand three. Um, we don't know if it's got the same timeline. It spreads more rapidly because we've now had double the cases than there were a total number of stars cases, it

doesn't appear to be as deadly. Um. But that said, a lot of people are pushed back on using Stars as an example of what to expect here, saying the Chinese economy is much more pivotal in the world. We

also have the backdrop of all of these tensions. And I think it's interesting that John and and really salient that John started on the blowback that the US is getting from China on the response, how much is this going to potentially rise to a political issue and cause tensions on the trade front at a time when we had,

you know, had some sort of resolution. We've we had phase one deal, Phase one deal sign now we move on to phase two, and you know, the coronavirus has created some uncomfortable mood music for those negotiations, especially when the side of the administration that has been more anti China, more pro tariff makes comments. Uh you know that you

referred to earlier being made. But that being said, common heads provided prevailed in the trail talks, the trade talks, and I think that will uh you know, that will happen here. Um, there will be an impact on growth in the first quarter. As I said in the US I think will primarily see it in the supply chain, not in the consequences of reduced demand for China, that that will have an impact. But the US is still a relatively closed economy, and you work in the demand

numbers and they're they're pretty small for the US. The erruption to supply maybe more, maybe more significant, but without having a crystal ball and looking at stars and think about this, that it's probably going to be hopefully going to be a first quarter event, and then the economy

does Jonathan, many people share that hope. The difficulty they might have be having at this point is that we spent much of last year with this tug of war between the consumer, this resilient consumer, this resilient services sector, and this really really soft manufacturing sector, not just a story for the United States, but a story for much of the developed world, including China as well, and we

never quite resolved the question. There were hopes that we'd come into this year and that manufacturing would start to pick up and to stabilize, but it was never quite resolved, and that an issue like this, a shock like this, can derail things again. What do you say about that particular dilemmon John I think the key thing is to watch jobs, because what keeps the consumer in aime is employment, and employment growth has remainder of us. The signals for

January is that has continued in the first quarter. Very strong readings on the labor market out of the consumer Confidence report UH, the initial jobless claims data remain extremely low. So I see, we have to watch jobs and that's the key thing here. UM. And the payrolls report this Friday, John, how important this payrolls this Friday? Given a lot of this though predate a lot of this particular survey will just predate any of the stress that we see in

the global economy right now. But economic momentum is very important. And you know when when when you're you're looking at the impact of something like sorts, it's like, what is the what what does the momentum in the economy that's been impacted? And the job's momentum has been strong, UM, and if it remains strong, then the US will power

through this um and that's key. And I think there are some signs we'll see what you know, we had very weak Chicago p M I reading last week on manufacturing that may have been distorted by Bowing, given the Bowing is headquartered in Chicago. We had a very strong reading out of the Richmond Fed Manufacturing Indicator, which we found to be statistically a fairly useful indicator of manufacturing. And we will get to know this morning with the I S M reading later on what what the January

manufacturing numbers like. Absolutely the difference between an economy that doesn't have manufacturers at two percent growing economy and we saw that last year and one word, capital spending comes back, uh and manufacturing kicks in and then that becomes two and a half percent maybe better economic growth, but um, the construction numbers, the residents numbers look good that I think I was going to continue to drive the economy

and I think everything comes down to employment growth. Here for a while, John, great, catch up with you to get your thoughts. As always, John Riding Bring Capital, Chief Economic Advisor, the focus of global markets and the world on the coronavirus coming out of China. Joining us now, I'm really pleased to say is Dr Amish Adalga JOHNS. Hopkins, Bloomberg School of Public Health, Senior Scholar, doctor. Fantastic to have you with us on the program to get your

brilliant insight. Let's just begin with a rather simple question that deserves, I'm sure a complex answer. What makes this coronavirus just so difficult to contain? What makes it so difficult to contain is that it is spreading between humans efficiently. That means a person can get infected and pass it on to somebody else and then maybe pass it on to somebody else. So it's spreading in the community and

that makes it very hard. And it's also spread through the respiratory route coughs and sneezes, which are much harder to really contain than something that spread a different manner. So there's a lot of characteristics that are kind of pushing that case count higher. To the last few weeks, a lot of people have been trying to understand the so called incubation period, the length of it, and whether you're contagious durre in it. Do we know anything more

about that? Now? We have seen some data coming from Germany that is really suggestive of transmission during the incubation period, when someone who wasn't sick at all passed it on to somebody somebody and then they got ill. This is something we hadn't seen with coronavirus is and it is something that makes control very hard because if you don't know who is who is contagious, you can't isolate them, you can't quote, you can't do any type of social

distancing to keep them away from other people. It usually doesn't cause the force of the epidemic. It's not going to spread, it's not going to be a big force in the spread of it, but it becomes very hard to completely eliminate the infection if you have these asymptomatic people who are able to bread during your incubation period. What's the fatality rate been, Like, I've heard a lot of arguments saying that that common flu is incredibly fatal and has had a much broader impact, yet it hasn't

necessarily created the same sort of hysteria. So the fatality rate that we're often quoting now is two percent, But that's a very skewed number because that number is derived from the cases that are being diagnosed in China, which are going to be selected from the more sick group of people. They're not testing people that are out in the in the community who have maybe more like common

cold like symptoms which coronaviruses can cause versus testing. People that are in the hospital with pneumonia need to be hospitalized, so you're getting what's called a severity bias. So that two percent we expect to come down as more and more people who have mild symptoms are tested, and as you've seen, the rate has been coming down as we get the case council higher and there have been there's only been one death outside of China, so that really argues that this is going to be less severe in

terms of fatality, much less severe than Stars. For example. Dr Dodga, do you think that the action that we've seen in terms of stopping flights and just in general recommending people don't go to China has been an overreaction based on what you just said. It's one thing to have travel advisories for individuals that are going to China so that they are aware of what the risks may be and what protective actions to take, but it's quite another to basically enact the travel ban against China and

people coming from from China. That I think is not warranted, and we've learned that from many outbreaks that those travel

bands do not work. They dive, they divert precious public health resources to enforcing a travel ban and and really looking at travelers versus actually ramping up our health system to be able to deal with these cases when they do occur in the United States, and it ends up making things worse in China because it creates economic damage, It creates stigmatization, and make logistically harder to get resources into that area, and it will not really have a

measurable impact on on a respiratory disease that's spreading this well in the community and over and almost two dozen countries. I think that we have to prepare for the event reality that this will come to the United States and we will have an outbreak of it here, and it may not be very severe, but it can be very disruptive to our health system, which runs basically at capacity on every day. This is a take that I think a lot of people outside of the medical world struggle with.

They look at the quarantine measures within China, massive cities effectually being shut down, and asked them, sounds okay, if they've got quarantine measures, why wouldn't we shut down our borders to the epicenter of where this disease, where this virus has come from, and they're just from someone from outside the medical world. That's kind of the response to what you've just said. What do you say back to that? Well, first of all, I would say that China's quarantining a

fifty million people was also unwarranted. That made conditions much worse than Wuhan, with shortages, with shortages of food, medical bed shortages, physician shortages, had people fled that area, lots of mistrust of public health authority, so that that on what China did was also wrong as well. But the point what I'm trying to make is that this has probably been spreading for some time in China before it was noticed. At least in November, it was spreading and

there were many many travelers leaving Wuhan. And remember that the spectrum of illness at this that the coronavirus causes includes things like the common cold, very mild type of symptoms, and many patients. I suspect that there are more cases in the world that have not been diagnosed because they recovered, or they were very mild or mixed in with flu and not diagnosed because they're very poor diagnosing viral infections. So it's likely that this is already spread and is

not completely containable. And what we want to do now while we have time is actually prepare our hospitals, make sure our supply chains are good, make sure that that diagnostic testing is scaled up. Because this this is really going to come here inevitably. Do you want to blunt the impact of it? And if you spend a lot of time focusing on travelers and quarantines and travel bands,

you're really diverting precious resources. And in the end it may not it's not going to make much of a difference because this is a respiratory virus that has some spread during a day symptomatic period, so it becomes very hard to contain. And travel bands did not work during H one and one, they did not work during Ebola, they did not work during HIV. They do not work,

and they actually make things much harder. Even though politicians love to run for them when when any time of outbreak occurs, don't to appreciate your point of view this morning, that's start to amish down yet, John, I guess from the Johns Hopkins Bloomberg School of Public Health, they senior Schollar there. We should of course point out that Michael and Bloomberg is the founder a majority owner of Bloomberg Alp,

the parent company of Bloomberg News. John, you know, Miranda Carr is like a few of the people we have. It's like authentic knowledge in China, not the distance thing. I feel like incredible live and breathes it. Yeah, I mean I feel so distant. I got I been to China. I've been literally like in Hong Kong. I mean like three quarters of a mile. You go to China and then you stay in the hotel. Yeah. I mean it's

a complete boggest statement to say been to China. We can bring it, Miranda car right now, High Time Security Senior analyst, Miranda talk to us about the damage being done to the economy at the moment. Well, you've got bitter. We got two elements to it. I mean the first is the consumption hit. So Spring festival the consumption. No one was going out, no one was spending going out and seeing people. So you've had that sort of short

term economic hit. But the longer term economic hit could be the one where we're seeing now where instead of going back to work and production starting to kick off, where you want the Spring festival sort of post spring festival ranks where everyone's like, you know, having a key I on new export orders and production levels that's not

starting now UM. And so this is where sort of a lot of the sort of industrials UM and you know, the private sector manufacturing may see a bigger hit than what we saw as a consumption hit over the spring festival shutdown RAND And we had a guest on the program in the last hour that said he's much more worried about the supply chain hit than the demand side hit.

Does that resonate with you, Well, yeah, I mean good, because with the demand side you can get I mean not you know, if people can spend money over Spring festival, they can basically they've still got it in their pockets. They can go out and when when the virus passes,

that consumption rebound can happen. But the trouble is going to be in areas where you know, they were already under pressure for the trade war and the supply chain sort of you know, shifting around into other areas, other countries, UM and other areas of the world. Now if they're not getting the sort of export rebound, they're already suffering

cash flow problems. And then you have a production shutdown, UM, then that means you're going to have a lot of the sort of same sector are going to be struggling with both cash flows and orders as we come into Q two UM and that will then depend, you know, depends how long the virus and hits um If it continues on to Q two, then then then that could

be a real struggle. MINDA. There's been some speculation that the PBOC that that the Beijing or will inject a significant amount of additional stimulus to offset any potential economic shock here. How much ammunition do they have to completely cushion the blow here? Well, interestingly, so they've actually got because they didn't go sort of full help in the stimulus for on the trade war, they still have a

little bit of ammunition left. I mean, if you think of infrastructure last year, it was only four UM your and your growth, So they've still got they can still bring forward a lot of the local government spending, local government bond issuance UM and get that spending. But again it does come down to when the virus starts peaking and construction CONSTRUCTUSUS. You know, you can't put infrastructure in place,

um is people aren't be able to move around. So it really needs you need, really need the virus to start sort of peeking and then movement to start going again. And then once you get into q Q, then you're likely to see a bit much much bigger stimulus package than you saw, particularly monetary policy easing, but also more infrastructure investment plans arounder. The constructive view on all of this is that we get some kind of V shape recovery. It's an inflection point that you have in mind that

we go beyond that. The longer this goes on for, the more you doubt that we will get that sharp V shape recovery out of the Chinese economy. Well, the official projections at the moment are for for the peak in seventeenth of February, and it's an incredibly precise date. Um. If it peaks then and then starts declining, then then we're basically we're going to see sort of Q two Q two rebound. The risk is obviously, you know, you know, even this time last week, singing was going to be

over seventeen um in in infected cases. No one was imagining that. So therefore there's it's the uncertainty about when that peak is going to happen, which is which is a big problem, and all the associated shutdowns with trying to prevent that, rather than necessarily the scale of the effect itself, Miranda, will this affect agricultural transfer from the United States to China, like to be direct soybeans from the United States of China. Does any of that get

gummed up so far? Well? I think no. I think that that that may have issues, but I think it appoints to an even more interesting one because one is one of the one of the things which is a big factor. I mean, one of the issues this year was going to be the you know, the pick price increases because of the swine fever. That's basically a food

safety issue. And then now you've got this which is obviously coming from from from wild you know, supposedly coming from wild animals, and you've got this whole supply chain, food distribution, food safety, all of that different aspects, and suddenly China's going to take quite dramatic action in order

to do that and make that investment. And to be honest, that's where some of the most interesting you know, if you're if you're thinking about where the upside from this can come then it's in that kind of you know, the could chain distribution in the seat safety and all the sort of defeat manufacturers. He should actually be benefiting from this because that's where they're going to have to address a lot of the issues that have got us into this place in the first place. Miranda, thank you

so much. Brian to car with Hi Tong International this morning. This is a joy. We haven't talked to Mickey Levy at some length here in a while, and it's important to do that now. He's with Barrenburg Bank, but that barely describes his contribution to thinking about what central banks do.

He's associated with the Shadow Open Market Committee. I'm not going to go into it all because of time, but the answer is back thirty fifty years as a group concerned about flow dynamics and stock dynamics within the Central Bank and worried about rising prices. Dr Levy, thank you so much for being with us today. There's this perennial call for inflation. Vice Chairman Clarica said to Bloomberg a few days ago he sees us nearing a tourist inflation.

Have we given up on the inflation watch? Is there inflation out there to worry about a little bit, Tom, but not really. I mean nominal GDP growth, that is current, all are spending in the economy is growing only modestly, so businesses really don't have much pricing power. Um, it's really interesting and perplexing that the FED is, you know, still insistent that inflation goes up to two percent. The

economy is really benefiting with the lower inflation. In fact, if you consider what's happening emmy out of China and with the sharply lower fil prices, that's going to flow through to UH lower energy prices, which benefits us consumers. So what's wrong with that? I mean, what's so important here? Mickey? And and and this goes to Javier blast I thought that a phenomenal job with Bloomberg Energy this morning of explaining this all of a sudden, it's really become global

even if it's just a virus. I don't mean to make light of the horrific damage this virus is doing. But what's the deflationary impulse you can gauge at Barrenberg right now, Um, not much of a deflationary impact. But to the way I view what's going on in China, is it's the negative supply shock, So it's in China. UM aggregate demand is going to decline. That is, people are going to save more, they're going to spend less.

They're gonna spend more on things, the things they things they think are necessary, but they're going to spend much less on discretionary spending like autos and consumer electronics and the like. And and this emanates around the world. Then on the on the production side of things, just the

bottlenecks and supply chains and the disruptions. We we really don't know the impact of this, but I would firstly, yeah, the economy in China was weak to start with, and you know, the official numbers they'll knock off a few tents from GDP, but in reality they're probably facing a near term decline in GDP. And this is going to affect the world, particularly manufacturing. And yes, in the next couple of months, we'll see it in the p m

I s in Europe and Japan and the US. Maybeah, I want to pick up on the oil point, the idea that lower oil prices on the margins will actually give a boost to US consumers. I've heard both arguments, and today we did see oil prices a little bit higher in the in the market. Now they're actually basically

flat eight cents traded on the IMAX. And I'm wondering how much the positive boost to consumers is offset by the negative income impact in the shale patch as we see an increasing amount of pressure on what had been the fastest growing or one of the fastest growing industries in the United States. I mean, how much it is a negative for the U S economy and a it hadn't been in the past. Okay, you're bringing out a

great point. Now that the US is net energy independent, um, the boost to consumers and there is going to be a significant boost as as the lower oil prices feed through to retail gasoline and home heating oil prices. UM. That will be partially offset by a decline in capital

spending in the in the oil patch. And so this is going to take a chunk out of capital spending in the GDP accounts, but the consumers ADP and it's and it's significantly Well, you know, with your decades of perspective on inflation and standing ready to fight inflation, what does the next marginal rate cut do? I mean, we've had some experience with this recently. Are you proposing a

rate cut is efficacious here? Mickey, No, absolutely not. Um. If we think about what's been hitting the economy even before this virus, we decline in global trade volumes, uncertainties in Europe, um, etcetera, etcetera. All of these have nothing to do with monetary policy. And so to ease further like the e c B and and the Fed did last year, while the b o J continues with its QUEWI, it has no impact other other than to boost asset prices,

stock prices, UM, increased income and wealth inequality. Really, if you think of the channels through which monetary policy is supposed to affect the economy, it is going to have no impact um. And so so central banks, the FED of course, is all over this. They'll they'll sit pat here and they'll talk about the reduction and inflation that's coming. It'll be temporary, and that will be the right move,

just just to hold still, all right. So there's the reaction function of the federals are But there's also a question of just how significant this economic shock is going to be. Just based on what you've seen, the idea that entire cities of people have been completely shut down in China? Do you think that markets are accurately pricing in the economic shock that has already happened, let alone, What potentially could happen if this virus continues to cause

shutdowns and travel impairments. Once again, a great question. We don't fully know the answer to it. You saw China over nack down eight. I think this is a major body blow to China that is going to have a lingering impact on their economy, and of course their official economic data really don't add up to what's happening in reality. In the US, we've had a decline in the stock market. I think what this will do is this is definitely gonna accentuate the decline in global trade. It's going to

really cause bottlenecks in in global production. The p M I s it's going to delay any any pick up. Eventually things will bounce back, but we should not take so lightly the economics of it is it's really going to happen in I mean, what do your European compatriots say about the ECB? Then John Farrell mentioned this, you know, twenty minutes ago or so, maybe you say the FED will wait and finesse it they won't cut rates. What does the CB do? UM? We should hope they're realistic

about this, Tom. The ECB already has their policy rate at minus fifty basis points and they're flooding their economy with liquidity. Do you think further negative rates are going to help everybody through? Well, let's cut to the chaser, Mickey, you're helping with an important panel March six in honor of Marvin good Friend, who just tragically died at Carnegie Mellon. His great statement was the amplitude of negative rates. Do

we do we need to get braver. I'm a good friend to Jackson Hole and imply a greater negative rate to clear the markets. I don't think so, Tom. I don't think the problem here is markets. The US is actually very well positioned here the the the US consumer and housing are doing well, there's no question, but that, UM, the production side of the economy, industrial productions declining a bit, and that's going to and that's going to show up in the I s M. That's that's heavily weighted towards

export orders. UM. But all in all, the US economy is actually moving along the path that the FED had predicted and moving along potentially, So the Feds should just be sitting here. And keep in mind the federal funds rate is zero in inflation adjusted terms, and there's more than the left liquidity in the market. So so through all this angst, we have to hope that the Fed you know it, takes an even key and says these are temporary impacts even if they last. Very cool, make

you leave you thank you so much. With Baron Burbanks, that's great to have John writing in the previous art and Dr Leavy here some really different perspectives. We now begin with our question or an interview of the day, even of the week on oil. He is Edward Morris.

He's a City Group. A careful read of his accomplishments is most interesting, including his work in politics at Princeton University and of course running all of commodity research for various houses in our Wisconsin again at city Group, Edward Moore, it's wonderful to have you on today. Can you calibrate the decline in demand for oil in China? Well, I think we can calibrate it to date. The issue is

calibrating going forward. We we actually think that China's right now, a loss of about four million dollars a day of oil demand. A lot of this is in the transportation sector. Uh. You know, they basically shut down at least half of their civil aviation. Uh. Very international repercussions of that. Freight and passenger use has has shut down. And yeah, it's a very large number. As I said, around four million dollars a day of an eleven million dollar a day system,

and their ripple effects have been going on. And I'd say that the the uh, it looks like the downside risk to this is much greater than the upside. We don't really see a shape recovery anytime in the future. As we do we measure our global strategic strategists in oil by what they do day to day. It's a joke, but Ed Morris you absolutely nailed in the fear over Tehran and Baghdad the idea of a market structure for a weaker oil price. Can you amend the Morrise call

they're even lower? Can you put a greater weight to the downside on oil with what we've seen in the last two weeks. Sure we can. We can put a weight on it. The question is how long level as so Uh, you know, we we have downgraded our outlook for Q two significantly. Q one and Q two we don't see oil getting much out of a fifty dollar range. But the fact that we have a fifty dollar price on Q two for Brent tells you that we think it's going to be in a forty dollar range a

good deal of that period of time. And yes, there is downside to that. The downside comes from i'd say three major factors. One is the amount of inventory that we think is possibly going to be built that good way heavily on markets. A second is what the real response of Opeque plus countries will be there meeting in Vienna at a technical level tomorrow and the next day, they are considering a range of options from doing nothing

to taking a million dollars a day out of the market. Again, they're thinking of doing it for three months or for a year, and there's no agreement yet that has come out, and uh, it's not clear which way things will go. We don't know whether this is going to be something that they're going to recommend ministers to get together for

to accomplish by March one. Are they going to wait for the March meeting and that brings up the third factor, namely to the degree that they postponed decision until their March regularly scheduled OPEC meeting or already scheduled meeting, then speculators will get at work. In this the speculative community has moved from a neutral to the shortest position, but

they have a further way to go. I mean I I think combined, and we know that combined manage money in Brent and w t I is currently long by a factor of two to one. That, by the way, may sound long, but it's not. If it were eighteen to one, as it was a year and a half ago, that would be long. But we we have had an experience and they're not so distant past past in which

a market forces manage money. In particular, we're actually short BRNT and that's where we had Brent prices going to thirty and w t I prices going to the mid twenties. So you know, there's there's some way to go, and what the actors of the market do will really dramatically impact how speculative flows work. So that kind of goes to where I wanted to go, which is you know, OPEC, OPEC plus, do you think they will wait to march.

It seems like we're in a scenario here or as you're painting, and we've heard from some others that the downside is pretty substantial here. Do you think they would choose to act sooner? I think now that we see prices continuing to fall every day, that that pushes them toward a sooner meeting rather than a latter meeting. We know from official statements that have been made that the fatties would like to cut down and they'd like to cut a million dollars a day out of the market

if that's possible. That's a level that strikes me as not doable yet. Um So the likelihood is that they're going to focus on a half a million validay cut and to do it sooner rather than later. And if they don't, I think they'll be fall at. I think the major obstacles at work are really on the western side. I don't think they're at work on the g c

C side. I think that even without a full fledged government UH in Iraq, they could UH actually pull off in agreement UH from the countries and effects that have the capacity not to not to deplete production because of natural forces, but to make a decision to reduce UH production from a targeted level. UM. I think the Russian situation has always been complicated. UH, it's made more complicated by a look at where they might fear that they

may lose market share. I wouldn't be surprised if the Kremlin now is looking at UH where Russian oil goes to in China, how much of it is by pipeline, how much of it would be a real market share loss if they UH drop production? So UH, the decision in Moscow is clearly going to be a political one. The supreme leader there, the president of the country, is going to lay in on it. He's gonna, you know, make the ultimate decision. But there are obstacles at work

in that decision. And how about the American producers? The shale UH phenomena over the last couple of decades has really changed global market dynamics. Where are the American shale producers right now in terms of supply given your UH, you know, kind of very cautious demand outlook. Sure, well, well, you know, this is an interesting period of time because we're seeing the final results from last year UH, and we're going to have guidance reporting from the company's UM.

We know that from the perspective of some OPEC countries. The whether it's wishful thinking or analytical is not clear, but they think that there is going to be a significant slide in US production. They're very optimistic about that because of all of the concerns that they've heard raised about UH, about cash flow problems that have been encountered by US companies. But our judgment is a little bit different. We have penciled in one point one million bell a

day increase for US liquids production. That includes around a hundred and seventy five bells a day of increased production deep water. It could be a higher number than that. We have almost three hundred thousand dollars a day of natural gas liquids UH, and that comes out of the gas pool, not out of the oil pool UH per se. And then we look at the US help market participants

and they've changed. We now have of drilling taking place by major companies like the four big major's, exciting, Chevron, Shell, m v p UH. They are almost certainly going to be growing their drilling activity over the course of a year. They're impervious to whatever the current prices that they've got guidance that based is based on integrated projects of oil, gas, petro chemicals, and they've got to grow. They're not gonna

shut down. A whole bunch of the UM. Independent large cap companies that are publicly traded are in very good shape. They're going to be increasing in all their drilling activity. UM. The private equity companies UH and the private companies that are family owned billion in the United States, that's a very big number. We think they're pretty well hedged out. UH. And you know, if we look at UH at the weekly rig count for the last ten weeks, the average number is up for UH, you know, almost a half

a ring a week. It means that the drop in growing has really stabilized. Is stabilized really the beginning of December, if not the middle of November. UM and at that level, production grows in the US and we think those who think it's going to be at the three or four hundred thousand Holliday level are going to be proven wrong.

On the other hand, if we get lower prices, and significantly lower prices we think are one point one million dollar day number could be shaved off by a couple of hundred thousand dollars a day, but not by more than that, and that means that demand and supply will still be We're srilled to bring you this morning. It will be out on our podcast and Remorse of City Group.

Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio