peak oil floats u.s. shall come at the secret kind the success, and we talk about that plans in relationship with exxon. ♪ alix: i am alix steel and welcome to our brand-new show, bloomberg "commodities edge." i have found my home for my love of the asset class. 30 minutes focused on the

trading behind the highest commodities with the smartest voices in the business. let's kick it off with spot on. it is the endless investor take on our big story of the day, and the spotlighted as energy. joining me now is jeff curry, global head of commodities research at goldman sachs, and investor john goldberg of bdl commodities, one of the largest oil focused hedge funds. they are france, by the way. they live next to each other. take a look at this chart. saudi aramco surprising the market today, raising its crude pricing to market for asia to make. jeff, how tight are we? jeff: demand. when you look at demand globally right now, it is tracking 1.9 million barrels per day. our expectations are 1.85 million. this is consistent with where we are in the economic cycle and you should we surprised by it.

when we talk about commodities as an asset class, it goes to the cyclicality of where we are in the business cycle. alix: do you agree? john: i do. we are exiting a period that is normally one of the weakest for oil. we have seen inventories declining for the first few months of the year, supported in part by what jeff mentioned, demand in the china, u.s. areas in particular. and also some specific supply outages. venezuela is declining. iranian crude production dipped a bit. in normally what is a decently week. ak period. and you had a bullish outlook, you are at $82.50 for each months? and john -- it has been a busy day. john: it has. john: as an investor in this

space, we are hesitant to assign a specific rice target. -- price target. but we think the possibly's persistence. and the curve is going to increase, which is good generally for investors in the front end of the curve. alix: i want to move on to another topic of the day. trade. wilbur ross, the commerce secretary, weighed in on that . >> china needs to import very, very large amounts of lng, and from their point of view, it would be very logical to import more of it from us then for no reason other than to diversify their sources of supply. but it would also have the side effect of reducing the deficit. alix: and if you take a look at where we are, the u.s. is boosting its oil exports to china. we are now at about $1 billion. jeff, is this a realistic conversation to be having?

jeff: commodities represent a very small portion of the trade deficit with the united states, for the united states outside of petroleum. petroleum is actually getting smaller. let's look at it in terms of the u.s., right now it is the second-largest oil exporter in the world when you think of product. i do not want to say we are not there, but we have a large deficit. in terms of thinking about china and the impact there, the growth rate on lng, we are 54% this winter. we have seen a big increase in demand, but a lot of that was eather driven because it was really cold in china. going forward, you will have to make the investment with the lng terminal, and so forth, so the growth will be unlikely to be sustainable at those levels. do i think it will help ease the trade deficit? absolutely. the market is heading that direction. the key is will u.s. be competitive into the asian

basin? last winter, you had price and -- prices at $11. now they are seven dollars. alix: we had the china's future contract last week, and you might be able to get the feel for it. set at 63.ude jeff: on the crude side, yes, but where is the big growth potential? i think it is an lng. the problem is you have a lot of lng supply coming out of australia in the pacific basin, which is going to make it difficult for the u.s. lng to compete there. long-term, you can absolutely make the case, but looking out to 2020, 2021, the question is can it remain competitive against the big increase is coming not only from australia, but as well as from the middle east? alix: the third topic has to do with the crazy volatility we have seen in all asset classes, but in particular i want to point out the s&p will versus oil. that correlation has actually

risen. i wanted to get your take on this. how do we view oil now as an asset class in light of equity volatility? john: the oil and broader macro asset classes, including the s&p and other instruments, go through different phases of correlation. there is a time when oil is one for one correlated to other asset classes, and then there are times when it shows you do a syncretic -- idiosyncratic development. we think we are hitting a period of time where, no matter we are on a risk on-risk off market, as we are in a specific commodity cycle, we think that oil will outperform asset classes, independent of whether the next move is up or down. and the reason for that is the inventory buffer for petroleum right now is so low that we think we will move into our own unique set of market dynamics. so both in spreads and flat prices. alix: jeff, when it comes to not

only oil inventory, but what do you wind up doing when you have that could roll over at the end of the day? how to you do that when inflation kicks in? jeff: there is a backwardation as a reflection of the environment. that late cycle environment, where demand is expressing the ability for oil supply to meet that demand, drawdown the inventory, and get the backwardation. so backwardation inflation go hand in hand, which is why you get the outperforming of commodities in this type of environment. alix: our special thanks to john goldberg. i will speak to you in a couple of weeks, and jeff curry, you are sticking with us. coming up, the commodity ready to break out after trading in a tight range. one expert seized 6% upside on trade wars. as we had to break, some of the nice commodity moves we have seen over the past week. copper now up 1.5%, despite getting whacked on the trade wars. cotton also able to post some upside.

this is bloomberg commodities edge. ♪

♪ alix: i'm alix steel, and this is bloomberg: commodities edge. it's time to dig deep and some bash into some of the market trends. a 29, the market saw billion cubic drop. inventories for natural gas at 346 billion cubic feet, below the five-year average. and oil inventory numbers were very interesting as well. everyone was focused on exports, but if you dig below the surface, they had a 5 million barrel increase. it is now sitting at the highest it's january 2015. here is the why. you have coming from canada into cushing as blockages are

removed, and you could have oil here in texas -- you can't get out because of the infrastructure that has to move to cushing. the question is, when refiners come back from maintenance, does cushing finally get a break? and the permian dropped by about one rig.ed -- one and i want to see what happens and you have oil prices around 63 and a big risk off steel in the market. producers get a little scared. now we want to move on to getting into the ringer. we will look at three charts that do not make sense. we are joined by jeff currie, head of commodities research at goldman sachs. this week, everyone wanted to be a soybean expert, but you are a soybean expert. when we look at futures, they rolled over on the trade war issue. the bottom panel shows our soybean exports to china. they are pretty solid. what happened here? jeff: what would happen if they

did implement a tariff on it? assuming their demands -- their ability to substitute away from soybeans would be very difficult. they could if they wanted to, but let's ask can they find alternative sources for the soybeans other than the united states? the answer is no. they import 35 million tons of soybeans from the united states. brazil and argentina are the other two largest producers. one thing unique about soybeans, 95% of the country -- comes from those countries. we look at brazil, brazil exports another 12 million tons to elsewhere in the world. so there is no possible way they can replace those soybeans from either brazil or argentina. you also have a very poor weather, growing conditions and argentina and brazil. the supplies are being curtailed. implementation of this would be very, very difficult. but it goes to a broader point here. as you dig deeper into goods production, the goods flow around the world, it is not very elastic. whether you are talking auto production, oil production, or even grains production.

i think the key there is that tariffs are likely to be a regressive tax on the people, because your ability to create any big shifts in either trade or production is very difficult. case in point, look at the aluminum industry in the united states. you haven't really seen any significant restarts. century has announced a restart, but we will see if it happens. outside of shale, the responsiveness of supply, whether it is commodities or the goods, is very limited. one of the reasons for that is how capital intensive the production really is. which means you make the sunk cost. even if you take intellectual property, if you made the sunk cost ability to respond to some , kind of movement and prices very limited. i would go as far to say one of the reasons why we have not seen much volatility in the is the cycle is the ability that production is becoming more and more capital intensive and less

dependent on labor. the bottom line that is -- the bottom line is it is very difficult to create any changes. this will likely act as a regressive tax on their own people, which means we will see how it all evolves as far as the politics and the negotiations go. alix: the important point is that is why the short cycle nature of shale was at the important, because it changed that dynamic. are we going to get a breakout? jeff: our target is $14.50. alix: that is a breakout. jeff: the reason why is it goes back to what is happening in the other commodities sectors, strong emerging market demand. our framework for approaching gold, we call it fear in wealth. let's go to the two bookends of gold prices. $250 in 1999 and $1900 in 2011.

fear and wealth in 1999. fear was zero in the developed market. tcom boom and the european union was coming together. what was wealth like in asia? you had the asian financial crisis. fear down, wealth down. the european sovereign debt crisis and the financial crisis in the u.s.. what about wealth in asia? off the charts. the dollar was week, stimulus -- weak, stimulus in asia. what about now? here and stimulus is modest, but what about wealth in asia? we just talked about saudi arabia was raising its price of oil into asia. asian demand is doing incredibly well. oil demand in asia is growing at 750,000 barrels year-over-year right now. similar to 2011. what will happen to wealth creation? it is going up. what do they do? they buy gold, which is the core of our view of $1450.

alix: coming up, one of the oil -- handful of women in the oil world will talk about her big plans. we discuss on bloomberg commodities edge. ♪

♪ alix: i'm alix steel.

this is time for what you need to know of alternative energy. want to drive an ev? you will definitely want lithium and cobalt. cobalt prices have doubled, and joining me now is claire curry, senior analyst at bloomberg new energy finance. walk me through the why of the huge price rises in those metals. claire: it is linked to ev's, demand has risen and so has hype. lithium and cobalt prices are rising for that reason. they are key ingredients to lithium-ion batteries. alix: and they are only produced in a few countries in the world. what about the company's? claire: the lithium is a smaller market, and there are only four major players. hile, argentina, and australia. that is why there is a tight supply around lithium. alix: take a look at demand for cobalt and lithium, really seen growing over the next decade. those lines are where the supply forecast is. walk us through the dynamic? claire: they are both tight today, demand outstrips supply.

we see a number of lithium lines -- mines coming online. the price will still go up. with cobalt, the same story. it is produced as a byproduct, which means suppliers of all types are going forward. alix: claire curry, of bloomberg energy finance. thank you. let's turn to commodities and focus on one executive in the commodity world, and today it is sara ortwein from xto energy. first, let's take a closer look at the company. ♪ alix: big oil loves shale, hates shale, let's shale, and this tumultuous relationships has lasted for decades. one company that gets praise for doing it right is exxon mobil, buying xto energy. xto has big dreams and wants to grow rig count 65% in the next two years. xto operates as an independent

company with exxon steep pocket. can xto is a powerhouse it wants to be if it loses its independence? alix: i recently caught up with sara ortwein, president of xto energy in houston. sara: i would not recognize it as independent. i would call it recognizing what is important to run the unconventional business. yes, this is a separate organization. we have other separate organizations within exxon mobil. they provide the skills and the expertise that we need for various parts of our business. alix: there is a conversation that potentially you will bleed some people if you wind up moving your headquarters to houston. how do you keep your talent when competition is so fierce?

sara: we have some people that want to stay in the independent world, but for the most part they see the potential of continuing to work in the unconventional, continuing to work on a world-class asset like the permian. also, to have the benefit of being connected with all the potential across exxon mobil. alix: they say your rig count is growing 65% in the next few years. what is the potential barrels produced? sara: it is hard to say. we have estimated right now that in the next few years, by 2025, we will triple our production out of the permian basin. if we just look at the title -- the horizontal drilling, it will be five times what our production is today. and that is by 2025. so significant potential for us and also significant potential

for the industry. alix: do you need to buy more acres or land to do that? sara: that is just on the acreage that we have today. we have significant acreage in the midlands basin, and in february of this year, we announced the acquisition of the last family acreage in the delaware basin, which is three continuous federal units, which are really green fields. there is a bit of production on them, but we are able to develop it as a project in a very efficient, effective way. with the contiguous acreage, we can drill longer lateral wells and be very efficient in how we develop it. alix: do you think you need to add more acres to get longer lateral, do some land swaps, or is your position complete?

sara: ever since the acquisition we have been adding acquisitions , through trade, and to core of uses in the delaware or in the midlands. we will keep looking to do that, where it makes sense. it allows for efficient development for us and others if we can do that. right now, our average well is about 10,000 lateral feet. most of our drilling in the delaware basin is going to be in excess of 12,000. we will look at what the link is over time, but coring of the theage, giving us contiguous position gives us the opportunity to do that. alix: with the exponential growth in the permian, what will be the return? with oil prices -- let's call it $60 for wti, and what do you expect them to get to as you get more efficient? sara: today, the beauty of the permian is that much of our inventory of wells is profitable even at prices sub 40.

today, we can develop and produce a barrel of oil for the -- from the permian for around $15 a barrel. alix: is that average and sustainable? sara: that is average today, and one of the things we have seen is continued efficiency. as we drill more wells and operate more wells, we get more and more efficient. since 2014, we have doubled the footage per day that we are able to drill in the midland basin, and we have reduced our per foot drilling costs by 70% of that same time period, from 2014 two o today. there is no reason to suspect that we would not see continued efficiencies over the next years like we have seen in the past. one of the things we see is technology continues to accelerate. alix: what constrains permian growth? what is the one thing that makes you pull back? sara: as i mentioned before, the beauty of the permian is that it

is profitable at fairly low prices. so we expect that we will be able to develop it through market fluctuation. infrastructure is going to be important, and that is the takeaway of the structure -- gas, ngo, crude. we see growth potential in the associated gas from permian production, but something around the order of 16 billion cubic feet a day by 2030. so that will necessitate more gas pipelines out of the region. alix: here is what is on my commodity radar. everything you need to know about coal, alternative energy, and politics. bloomberg's new energy finance has a killer conference next week, and bloomberg will be speaking to rick perry, u.s. energy secretary, plus executives from murray energy southern, and bp. , you don't want to miss that.

that does it for the first show of bloomberg "commodities edge." thank you to largest thursday's at 1 p.m. new york time. ♪

julie: i am julie hyman in for scarlet fu and this is bloomberg "etf iq." we focus on the assets, risks in rewards offered by exchange traded funds. ♪ julie: tech stocks have been battered over the past months , taking a lot of etf's with them. we talked the manager of the world's biggest blockchain etf about surviving in this environment. globetrotting go to explore etf in other parts of the world like europe, asia, and