tv Whatd You Miss Bloomberg January 31, 2022 4:30pm-5:00pm EST
taylor: another rally into the close. look at the buying power we have seen pushing the nasdaq, going back to the best day we have had since march of 2021. the best two days since april of 2020. if you look at the board, a different story on the month, climbing out of bear market territory. still so in correction territory, off 9% or so for the month of january. it was all for the month, 45 basis point move up in the two year yield. . commodities is all the focus of today, as we think about these inflationary hedges. changing up the board again, it is a federal reserve and that two year yield.
it is going back six weeks as rises and the two year yield, if you can see, going back to one of the best months we have had since october of 2020. that was the market wrap. "what'd you miss?" starts now. caroline: i am caroline hyde. as taylor was saying, january, a month we will remember for the market volatility. swings at every single corner. today's triple take will focus on an asset class, commodities. u.s. natural gas posting the largest january gains on record. a mix of supply concerns, frigid weather, playing a part in that. oil is not being left behind. . the best january and 30 years or so? romaine: talking about 17% rises on wti and brent crude. . now talking about $90 levels.
we settled in around $88. a few weeks ago, everyone was talking about $100 a barrel oil. there were a lot of people that were snickering. we were camped out around in the $70 range on wti. it is starting to look like a possibility. we know the demand is there. somewhat tenuous because of the pandemic. overall, what we know is the supply is not where it needs to be. that is part of the reason the chart behind me looks the way it does. taylor: we heard comments from the dish or group as well. let's talk about this with sheila tobin, bloomberg news energy reporter. talk to us about the supply chain -- supply-side. . i'm curious how $90 a barrel is not tempting for these producers? sheila: basically, it is all about -- when it comes to the shale industry in the u.s., oil is very tempting. their commitments to investors.
for the longest time, before the pandemic, all they did was grow. i don't think that is set among investors. since the pandemic, they decided to go ahead with a new approach. that is on the u.s. side of production where we look at outside of the u.s., opec, they are struggling to meet their monthly commitment and they don't have as much capacity as previously thought. to a large extent, it is a supply issue right now. caroline: and as stephen short was telling us, there has been that lack of investment. a large part of that is the investor base holding back, not wanting repeats of previous blocks that have been occurring when companies have delved in, have reinvested one prices go high. this is an energy transition that is rocky. some people feeling that is why the energy crisis in europe has been so painful, this movement
particularly in germany away from nuclear toward a gas that is less per tent -- less dependable. do we have to make clear that an energy transition is always going to be somewhat volatile? sheela: i think you are right. it will be volatile. it took us this long to develop and establish all of our routes for all of the hydrocarbon that we are using now. i think it takes some time. it will be a rocky road before we fully establish ourselves with renewables. until then, i guess there will be a lot of volatility, especially at a time when our conventional sources, which is your fossil fuels, are having a severe supply shortage. i guess we should expect this. romaine: talk about the longer-term issues, particularly in the context of geopolitics. when we talk about ukraine and russia, there is talk about the idea that this could move europe more down the road of energy
independence with regards to renewables. it is also raising questions about lng capacity. and whether there is a more efficient way of getting that lng to our allies in europe. sheela: i mean, the tension in europe right now with russia and ukraine, basically, it is a global supply chain. so if that area has an issue, then it is going to have a domino effect everywhere else. right now, we hear a lot of chatter that people are starting to look around for alternatives. alternatives to what they could usually get from russia. this is also going to happen in lng. we are going to have to look at how we can push ahead with more exports out of the u.s. taylor: what specifically are those alternatives? sheela: in the case of oil, it will be like alternatives -- for instance, if there is disk -- if there is destruction
to russian supply, they will need to find replacements. it could be found in canada. when you have such a small supply pool, it is going to stretch the supply -- of able supply resources even more. caroline: going back to those calls, romaine painted a picture of $100 oil, people feeling that was laughable. now, we had stephen earlier saying that is where it is going, particularly in the second half of the year. gas prices, a record run for january. is this where you see 2022 coming clear? these sorts of price points that we will see? sheela: that's right. we have already had quite a few major investment banks, even goldman sachs, they were one of the first few that came out and said they were expecting it for the second half of this year. i guess the way the trajectory is progressing, it probably will happen as they are projecting.
it is all largely because of supply shortages at a time when demand recovery out of the pandemic. we are going full steam ahead with that recovery. and supply is not catching it. at the same time, there is all this underinvestment, this transition that people are pushing towards. it is all coming together and causing this volatility, this spike in prices, and, yeah. romaine: any issues here, back seat side here, any issues with regard to our refining capacity? sheela: there has been a series of refineries that have shot over the last several years. some of them have converted. some of them have shut down for good. after the hurricanes last year, not just last year, the last several years. we have seen capacity transition away from the refining industry. if that were the case, we need
to find alternatives to produce the consumer fields. for now, as i said before, it will take time before you offset that loss of refining capacity, offset that loss of fuel. that normally will come out of these refineries in the gulf coast. last weekm we had on our team a report saying a new jersey refinery will reinstall one of their field producers in it. and they shut down a couple years ago because it was not economical. now they are thinking of putting it back. there is an urgency in trying to meet demand. some of these companies can do it, if they have the ability. and i guess the rest of the market is watching. caroline: we wait, we watched, and we consume these amazing prices. we thank you. aching down these energy moves. taylor, you were mentioning, and
i referenced to it too, stephen short, who was with us earlier, he is from the short group, has been focusing on the commodities area for years now. he pointed out one of the drivers of high -- high-yield prices. >> it all comes down with oil, down to scarcities. we are reaping what we sow over the last few years. we have to keep in mind that wall street and governments in the west have pressured oil and gas producers to ship capex in order to decarbonizing and move away from fossil fuel production. therefore, is those dollars dry up to bring more infrastructure, more btu's to the market, we are looking at continue to scarcity and this is where the market is pricing in in the futures market. caroline: let's talk about the green effect on oil, as the global economy searches for cleaner energy. regina mayor is with us. it has been too long. we love having your voice on the show. talk to us about this clunky,
this awkward transition that has been met with plenty of volatility. regina: energy transition equals volatility. when you say transition, it implies a stable, we are going to move from one source of energy to another source. i prefer to think of it as a transformation. we have to decarbonizing the existing fossil fuels, while renewables ramp-up. i think as investors, we need to encourage decarbonization of existing hydrocarbon as well as investment in renewables. i totally agree with the previous gentlemen, that we are reaping what we so. these capital investment decisions were made over the last five years, and we knew that we were going to face a supply constraint. i don't think we knew it was going to be this rapid and severe when we were living through the pandemic, and oil settled in the negative. now it is all about life scarcity with demand returning to pre-pandemic levels. taylor: how do we make this transition in a more reliable
way so that we don't actually have to backtrack our steps? regina: i think the key is to not anticipate that we can. flip a switch overnight i think investor sentiment and the governmental sentiment has put a lot of pressure on these companies to move and pivot immediately. but we are a world that is hungry for energy based products. if you think about all of the things that they show up today, everything from spandex and the yoga pants you might be wearing, to the plastic materials in an electric car, those all require fossil fuel. how do we reduce the carbon content of those fuels, like through carbon sequestration? and like getting the coal out of -- and implement renewables so that you can achieve this panoply of
energy sources with lower carbon content. one of you mentioned germany's decision to move away from nuclear. in the u.s., we have nuclear assets that provide a lot of carbon free baseload generation, which we would be remiss if we retired assets too early. i think government investors and the companies need to work together to assure energy security, energy supply energy reliability,, and affordability. romaine: what is the communication like? we know what the government is proposing, at least the current government and administration. we have some sense of certain companies that have staked their claim to hear. are they on the same page or are they going on their own and hopefully at some point down the road, we meet up? regina: they are not on the same page, romaine. and they should be. hopefully, they will at some point. there are so many perverse incentives that exist in the system, where we are incentivizing the purchase of an
electric vehicle, which from a carbon abatement content perspective, is far higher than if we increased the incentive for carbon capture and carbon sequestration. or if we changed the emission regulations. romaine: why do you think that is? i have heard this argument before when it comes to ev's, that they are not necessarily as green as we paint them to be. why do you think that captures the imagination so much when we talk about climate change, but not necessarily the other measures? regina: i don't think we look at the total lifecycle of an asset, and say what is it that is my complete carbon footprint? all of the components of an electric vehicle, where do they come from? where are they manufactured? what modes of transportation did they have to use to come together to be assembled? a lot of folks don't necessarily realize that plastic starts at the barrel of crude oil. i think it is the education gap and the lack of appreciation for what powers our planet. and the fact that industry has
not done a great job of selling its own narrative. they are getting better now. right now, we see the industry and government so far apart, it will be hard to bring them back together in a way that reduces volatility in the short term. caroline: to a large part, the investor base has now moved. the investors -- esg is a key focus, the desire to be looking to invest in the right way to help your stakeholders, whether they be your employee based on the like. how can -- can we ever reeducate on that as to the lower hanging fruit that we can be investing in to make a slightly more environmentally friendly world? regina: i think the key is going to be not demonizing one over the other. the goal is to decrease the planet's warming to 1.5 degrees scenario. how do we get there as quickly as we possibly can to avoid 1.8 to 2.4?
decrease we focus on carbon abatement and giving the right incentive for carbon bateman and not focus on, we need to eliminate fossil fuels from the face of the earth because they are the ones that are damaging our climate. have to get out of that rhetoric and talk about solving the 1.5 degree c challenge. caroline: are any countries doing that? regina: not yet. i think we can learn in the u.s. from what europe has experienced. the massive increases in natural gas prices, as they have gone through colder winters, and that perverse incentives around reducing nuclear capacity or saying we will not allow the production of grey or blue hydrogen on the continent. it might get manufactured in the u.k. and moved over to europe. those other things we can learn not to do. caroline: regina mayor, global head of energy mayor with a global perspective. another deep freeze about to shake up the energy sector as the storm is bearing down on texas. we will talk about the weather, jim roemer is with us, president
romaine: today's triple take is focusing on the commodity space, and the weather is plain a big part and what we are seeing out there with natural gas having the biggest january gain on record, as frigid temperatures swept the northeast and now parts it down south. taylor: not only texas, but florida. the iguanas falling from trees, they are so-called. they recover when the weather starts to get normal again. let's try to move from iguanas and the weather into a conversation with jim roemer. you know him as the president of best weather and the author of
"weather wealth newsletter." how are you thinking about net gas right now, whether it be cold related? we have talked about the geopolitical tensions in europe with russia as well. pretty big gains so far this year, and now for gas. jim: incredible. we had a record warm december, followed by the opposite in the last two weeks. the last -- that weather will continue through february and march. . there could be a squeeze in natural gas, maybe prices go to six dollars. part of it is also the russian tensions. if things calm down in russia with ukraine, we could have a slight down initially, because russia is cutting off the exports to europe right now. very volatile markets in many commodities, probably because of the weather for sure. caroline: many braced for january to be called, and it seemed to leave us hanging. you advised a lot of hedge
funds. were they wrongfooted? jim: i'm sorry, where they what>? caroline: wrongfooted? jim: they have been advised, most of my clients over the last couple of weeks, to do options strategies and to pay attention to the cold weather. not, only in the northeast but the planes and the southwest where another major cold. . it could cause some freezing of wells down in texas over the next couple of weeks. we advised natural gas producers, giving them a heads up. i'm not sure i answered your question. my apologies. romaine: that's ok. she does that to us all the time. i'm curious if you can talk more about the agricultural side. anytime you see this weather, people start to ask a lot of questions here about what is going on with the crops, not only in the u.s. but in south america, which is getting some bad weather as well, or unusual whether i should say.
jim: we have inflationary spiral in commodities. the weather, this cold arctic blast, adding to that fire. sodium prices making new highs here. renewed drought in south america, particularly argentina and southern brazil. flooding in the northern part of brazil has turned the coffee crop, we have a drought in other areas. wheat prices were down because of potential ukraine situation to be eased. if that were to happen with russia, that is an unknown, that could pressure on the wheat market. in the medium-term over the next several months, la niña, given the cold winter, we could have another drought in parts of the midwest this spring and summer. if that is the case, we are raising bull markets in many commodities, grain is one of them. potentially more. coco too starting to dry. the ivory coast and ghana,
another area where we are watching for bull market down the road. taylor: round it out for us. oranges, orange juice? jim: orange juice. people drink orange juice to fight covid, it is very healthy for you. but florida does not have the size or the crop they had 15, 20 years ago because of citrus greens. does not have the impact of the market like it did in the 1970's and 1980's when florida produced 2 million boxes of oranges every year the weather in florida, it is devastatingly cold down here. but it is not enough to affect the orange juice market. the dollar, it went straight to -- it has more of an impact than the orange juice market. caroline: an extraordinary month for oil to rally as high as it has. given the strength of the dollar. broad perspective there across all of those commodities. we want to thank him, jim roemer, best weather president. thank you. coming up, our final thoughts.
romaine: time for our final take. our triple take is what is happening in the commodity space. it has been a wild ride and we are only one month into the year. caroline: it is the one place you have outperformed in january. the only people smiling and january are those along their. taylor: you needed to add some oil in there, caroline. romaine: i do wonder what this means when we talk about economic growth. usually when you see commodity prices rise, it is a bead on that but we know so much of what is driving this is on the supply side. does demand rise or do we end up with this? taylor: the transition to green energy, we have a great chart showing what that means for this transition if it continues.
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