CONCERT.
HE
DETAILS COMING UP.
A BRENT OIL IS ABOVE $63 A
BARREL AS OPEC SUPPLY CUTS AND
THE RESPONSE TO U.S. SANCTIONS
ON VENEZUELA KICK IN.
PRICES ARE NOW AT $55.14 A
BARREL ON CRUDE AND BRENT IS AT
$62.78.
U.S. CRUDE BROKE A THREE-MONTH
LOSING STREAK, POSTING THE BEST
JANUARY ON RECORD.
JOINING US RIGHT NOW IS TOM
KLOSA.
THANK YOU FOR JOINING US.
>> HI, MARIA.
MARIA: HOW DOES VENEZUELA FIT
INTO THIS IN TERMS OF THE SUPPLY
AND DEMAND STORY ON OIL?
>> WELL, VENEZUELA HAS BEEN
LOSING OIL PRODUCTION FOR THE
LAST FEW YEARS.
THEY DID IT DURING THE CHAVEZ
YEARS AND DURING THE MADURO
YEARS BUT THEY STILL PROVIDE
ABOUT 600,000 BARRELS OF CRUDE
IN THE UNITED STATES.
THINK ABOUT CRUDE AS
CARBOHYDRATES AND PROTEIN.
THEY HAVE A CRUDE OIL THAT'S
LIKE A PROTEIN AND THE WORLD
NEEDS RIGHT NOW.
THERE'S A PRETTY GOOD CHANCE I
THINK THIS QUARTER THAT WE GO
FROM VENEZUELA TO VENDOMONIUM
AND WE DON'T HAVE VENEZUELAN
CRUDE AND IT FORTIFIES PRICES
THROUGHOUT THE WORLD.
>> ONE OF THE THINGS WE'RE
SEEING IN OTHER MARKETS, STOCKS
AND BONDS, FOR EXAMPLE, IS
RISING PRICES AND IT'S
SUGGESTING THAT INVESTORS ARE
PUTTING RISK BACK ON.
SO WHEN YOU LOOK AT SOME OTHER
ASSET CLASSES LIKE OIL, IS THE
FACT THAT OIL'S GOING UP ALSO
HAS SOMETHING TO DO WITH
INVESTORS ROTATING IN AS THEY
PUT RISK ON AND LOOK FOR PLACES
TO PARK THEIR MONEY.
>> IT'S AN INTERESTING CONSTRUCT
AND WE'LL FIND OUT IN THE NEXT
FEW WEEKS.
ONE OF THE PROBLEMS OF THE
GOVERNMENT SHUTDOWN WAS WE LOST
THE PICTURES THAT THE CFDC,
COMMODITY FUTURE TRADING
COMMISSION TAKES OF THOSE
INVESTOR MONEY FLOWS.
BUT I THINK YOU'RE RIGHT.
I THINK THAT THE MONEY FLOW IS
COMING BACK INTO OIL.
IT'S A GOOD WAY TO PLAY WHAT
COULD BE OTHERWISE DISASTROUS
WITH LOSING VENEZUELAN OIL AND
SO I THINK MONEY IS THE BIGGEST
FUNDAMENTAL AND IT'S FLOWING
BACK INTO MOSTLY LONG POSITIONS
IN OIL.
DAGEN: TOM, THIS IS A WONKY HE
QUESTION.
IT'S DAGEN McDOWELL.
VENEZUELAN OIL IS HEAVY AND
SOUR, ISN'T IT, UNLIKE THE TEXAS
LIGHT SWEET.
IF WE LOSE THAT OIL, CAN WE
REPLACE THAT TYPE OF CRUDE
EASILY WHERE IT'S REFINED RIGHT
NOW?
BECAUSE THOSE REFINERIES AREN'TC
BECAUSE THOSE REFINERIES AREN'TN
BECAUSE THOSE REFINERIES AREN'TT
REALLY MAKE THOSE SWITCHES
EASILY TO REFINE A DIFFERENT
TYPE OF CRUDE.
>> YOU CAN ALWAYS RUN THE LIGHT
AND THE SWEET.
THE PROBLEM WITH THE LIGHT AND
THE SWEET IS THAT YOU GET A LOT
OF GASOLINE.
GASOLINE IS THE WORLD'S
UNDESIRED HYDROCARBON.
IT'S ODD, PEOPLE THINK VENEZUELA
WILL SEND THE PRICE OF GASOLINE
HIGH E. WHEN IN FACT IT MAY MEAN
WE'RE GOING TO HAVE TOO MUCH
GASOLINE PRODUCTION FROM U.S.
REFINERIES.
IF THEY HAD THEIR DRUTHERS THEY
WOULD RATHER HAVE THE HEAVY
CRUDE AND MAKE DIESEL AND JET
FUEL AND PRODUCTS THAT PAY A BIG
PREMIUM OUT THERE.
IF I HAD A DIESEL CAR OR AN
AIRLINE I'M A LITTLE MORE
WORRIED THAN IF I DRIVE A MOTOR
FUEL-FILLED CAR.
MARIA: EARLIER TODAY, SEVERAL
EUROPEAN COUNTRIES INCLUDING
SPAIN, FRANCE, THE U.K.,
RECOGNIZED VINCE WAY
RECOGNIZED VENCE WAY
RECOGNIZED VENEZ WAY
RECOGNIZED VENEZUEAY
RECOGNIZED VENEZUELA'S
OPPOSITION LEADER, MR. GUAIDOS,
AS THE COMPANY'S INTERIM
PRESIDENT.
WITH THAT UNREST, WHAT ELSE DO
YOU THINK HAPPENS THAT COULD
AFFECT U.S. REFINERIES?
I MEAN, IS THIS A MAJOR IMPACT
FOR U.S. REFINERIES?
>> IT COULD BE.
I MEAN, I THINK THAT WHEN YOU
GAME THIS OUT, YOU HAVE TO GAME
IT OUT AND YOU HAVE TO FIGURE
THAT THERE'S A POSSIBILITY THAT
VENEZUELA WILL NOT BE EXPORTING
ANY CRUDE OIL IN THE FIRST HALF
OF 2019.
YOU KNOW, WHAT THEY HAVE RIGHT
NOW IS A TRICKLE COMPARED TO
WHAT THEY USED TO AND SOME OF IT
GOES TO INDIA, SOME OF IT GOES
TO CHINA, SOME OF IT GOES TO THE
UNITED STATES.
BUT THERE'S A SCRAMBLE.
IT'S AS THOUGH THERE'S A BUFFET
AND THERE'S A LOT OF ITEMS AT
THE BUFFET THAT AREN'T THERE
RIGHT NOW FOR U.S. REFINERS.
THE LAST THING THEY WANT TO DO
IS MAKE NOR GASOLINE.
THERE'S -- MORE GASOLINE.
THERE'S TOO MUCH OF IT.
THEY CAN'T GET THE PRICE OF
CRUDE OIL FOR THE PRICE OF
GASOLINE.
IT'S MORE OF AN ECONOMIC
ANNOYANCE FOR U.S. REFINERS.
FOR THE WORLD, IF WE LOSE
1 MILLION BARRELS A DAY OVENS O
VENEZUELAN CRUDE, WE LOSE LIBYAN
CRUDE BECAUSE THEY'VE HAD
PROBLEMS THERE, OR WE HAVE
TOUGHER SANCTIONS ON IRAN, WE'LL
SEE HIGHER PRICES BUT NOT APOCK
SEE HIGHER PRICES BUT NOT A NCK
SEE HIGHER PRICES BUT NOT A NOTH
SEE HIGHER PRICES BUT NOT A NOTG
SEE HIGHER PRICES BUT NOT A NOTE
NUMBERS.
MARIA: HOW DOES THE MARKET
CHANGE IN THE NEXT FIVE YEARS?
>> NEXT FIVE YEARS, I THINK
YOU'RE GOING TO SEE THE UNITED
STATES EXPORTING OCCASIONALLY 4
AND 5 MILLION BARRELS A DAY OF
CRUDE OIL, MAYBE MORE.
WE WILL BE THE LARGEST CRUDE OIL
EXPORTER, BEYOND RUSSIA AND
SAUDI ARABIA.
WE'LL BE PRODUCING MUCH MORE
THAN RUSSIA AND SAUDI ARABIA,
BUT WE'LL BE USING QUITE A BIT
OF IT.
SO AS LONG AS THE PRICE STAYS IN
THE $50 RANGE OR HIGHER, WE'LL
SEE SHALE COME ON AND WE'LL BE
PRODUCING THREE TIMES THE AMOUNT
OF SHALE OIL THAT WE DID AS
RECENTLY AS LIKE 2012.
MARIA: THAT'S INCREDIBLE.
TOM, IT'S GOOD TO SEE YOU THIS
MORNING.
>> IT IS.
GOOD TO SEE YOU TOO.
IT IS ENERGY DOMINANCE.
IT'S LINING UP JUST FOR TERRIFIC
PRODUCTION NUMBERS FROM THE U.S.
COMPANIES.
MARIA: REALLY AMAZING.