oil: opec warns the market is getting tighter. aluminum ascent. u.s. engines on russia take a bite out of global supply. no trade fair. war asune to a trade china demand rages on. i'm alix steel, and welcome to our brand-new show, "bloomberg commodities edge." it's 30 minutes focus on the companies committed trading assets -- the companies, the

trading assets and the minds behind the hottest commodities with the smartest voices in the business. let's kick it off with spot on. a macro view of the big stories of the week and our spotlight, geopolitics pushing oil to the highest level since 2014. from syria to percent total sanctions on iran. >> i can't forecast how the tensions will go, but definitely, it will be a reason to push the prices up. >> we have also noticed a premium, geopolitical premium priced into the formation. >> to the extent that the president decides not to sign the waiver, and we do it reimpose the sanctions, not only will it be primary sanctions, but there will be secondary sanctions. i think they will continue to have a very strong impact on the economy in iran. alix: joining me now is the senior adviser at the largest financial group in northern

europe, and the head of energy and natural resources. ladies, thank you for being here. i want to start with you, in your opinion, how much his geopolitical risk in the market? >> i think it is quite a lot. it has been a long time since we have seen the geopolitical price increase that much. today, as well, they released a report saying global inventories have fallen sharply for the last two years as they try to adjust for it as well. that means it is less of it in the markets. for the last two or three years, we have not seen the geopolitical price in the oil markets. even though it has been not been quite in the middle east. that is because there's been lots of oil available. now, when the oil markets are seeing less inventory, and it is declining, inventories are declining, they're starting to get scared again. is it enough oil available when there's more turbulence around the middle east? alix: as people point out, they

syria doesn't produce a lot of oil. i understand the sanctions but can you give us the perspective of what is the risk of everyone talking about oil? >> we are seeing a spike in the last few days. it started with the administration changes, or with more hawkish elements. expected sanctions against venezuela, iran, but you are also seeing the lower supply, that is driving a lot of that. my clients in texas are quite excited that geopolitics are finally getting priced back into the equation because they have not been priced in but there is a real risk in the markets. alix: your clients in texas, what do they do when they see brent at $70? disciplined.y aren't they? regina: absolutely not. there is no governor over shale production. [laughter] there is still storage from a

ways to get this product to see big investment with lots of folks coming in. in the u.s., looks like a stable, regulatory regime with abundant supplies and on chores shore is a big focus. i thought the recent u.s. mexico bids only attracted 1% and fed was interesting. that shows people are focused on onshore and tight shell access. alix: that is from the u.s. side but you mentioned opec, venezuela and iran are the two question marks people are looking into. could you see a double opec cut if you have venezuela and oil -- venezuelan oil really real off? thina: iran has produced one million barrels less at the start of 2016. it has increased the production quite a bit for the last 1.5 years. if the u.s. is starting to put new sanctions on iran, you have

to expect the oil production is declining again. venezuela has had problems for a long time, so they have fallen sharply, especially the last couple of years. with the geopolitical instability, i don't see a lot of change in the very short term. there is a big risk that even more oil is going after the , and how much control . es opec really have appear alix: but $70 oil, that is a demand story, tina. thina: from this point, you will see it in 2014 as well that they didn't worry because the oil demand will switch and go from other energy sources. you see the switch to greener energy even faster. i think you know that opec should worry about this. also in the report released today, they pinpointed that because they said they are not focusing that much on

inventories in long growth but how much has actually been invested in the last few years. alix: this is creating interesting dislocation in the market for the short-term, and i want to take a look at the short-term time spread. the wti and brent. brent is a lot tighter on the than wti. why is that, regina? you would think it would be universal. why is wti continuing to lag? regina: because of the abundance and the availability and the ability of the u.s. to use it. you have major facilities being in in the u.s., refining expansions and other investments, for that product. it can stay in the u.s. or go elsewhere. it is quite cost-effective to even go elsewhere. alix: through the pipelines, i'm wondering, i know you talk to your clients and they are feeling bullish, but if they cannot get the oil out of

midland, that cripples their availability to take advantage of a $70 price. regina: it becomes a potential downward factor in the tariffs that were proposed and those also have a limiting factor. a lot of the pipeline used steel. there is still quite a lot of bullishness and quite a lot of way to get product out. we still use trains and shocks. -- and we still use trucks. so we can still move it all around the world. alix: to wrap it up, you see the various geopolitical risks, how much premium is sustainable and how much will drain out if, for example, there is no bombing of syria, for example. no iran sanctions coming back online. thina: we have seen oil prices two up 2-

$2-3 for the last week or so. i think we will see the political risk fade, and it could fall two or three dollars and the very short term. in the longer term, it is more about how to get out to the market. alix: it was a pleasure ladies. good to get your perspective on this very intense geopolitical commodity week. our thanks to thina and regina. coming up, the aluminum market is having its own oil moments. we will explain what that means after the break. here at the break. here are the big commodity moves of the week. they are dramatic. aluminum up, soybean graining grinding higher. this is "bloomberg commodities edge." ♪

steel.'m alix

this is "bloomberg commodities edge." it is time now for the data dig, where we dive deep into the market trends. natural gas inventory numbers are out this week, down 19 billion cubic feet. that is giving a nice boost to some gas prices because storage, 375 billion cubic feet below that five-year average. we also saw a monster build in the oil inventory number up 3.3 million barrels. let's dig behind the wide. we saw a ton of latin american imports, 4.6 million. a lot of that made its way into this here in cushing. that had a record build for that area. exports hit his be bump, down bump, down a speed 45%, and u.s. production continues to climb.

u.s. production is all about the bigger oil rig number. last week, we learned high oil prices means more rig. total rate was added by 11 and with the horizontal oil rigs, it the permian was up two. oil prices grind up higher, do more resources make their way into the eagle ford and other areas like the basin especially as permanent oil is landlocked. i want to get in where we talk about three trades on three charts. mike, you are the guy i call when i need to talk about all things soybeans. but, we need to talk about a lot of things now. aluminum is the commodity for the week. you can see aluminum prices the the blue line, rallying the most from 2012. the white line is the demand versus supply dynamic. demand continues to pick up. does aluminum need to break out even more? mike: the key thing to remember

from the chart is a significant correction below the annualized mean. the most significant market but the demand for supplies still strong. what promoted it is a spiking vix. it is one of the things when you look at the market, the path of least resistance. we got through the pain, did the dip and it is now back to the , trend. alix: and the catalyst continue -- does the catalyst continue to provide the upside, or do you think it will come from somewhere else? >> it is the strongest ratio is in 14 years. the trend is pretty strong. alix: let's talk about soybeans. this chart, it is a bullinger band. the redlined is two standard deviations to the upside and the green line is two standard deviations to the downside. where are we after last week's selloff? mike: this is a chart, i like to point out the measure of the

markets, the narrowest in 12 years, the market is ready to break out. it dipped to the mean, the 52-week average, and bounced quite strongly above it for reasons it was not supposed to. we were worried about china cutting imports, but it looks like it might be the opposite. in this case, the market needs an excuse not to go up. it needs a good growing season and is likely to continue higher. the most narrow range, and 12 or in 12 or 13 years. alix: beans in the teens, that needs to be a lower third right now. there is conversation in a that the natural gas number in the permian basin could go to zero. this is the why on a broader basis. the blue line is natural gas

prices, that white line is the storage number rolling over. do we need to break out even more on total u.s. basis? mike: it looks like it is happening. you can see the inverse relationship to prices in inventory. here is where i like to make the connection between natural gases and soybeans. the natural gas range of last year was the narrowest in the history of the contract. it is ripe to move, it is ready to break out and you can see the , charts are showing a better fundamental. to me, at some point, natural gas should continue the rallied y. alix: that is true. mike, thank you so much for the trade. coming up, $80 oil, weaker regional oil prices and what this means for a producer. i talked to the ceo of a .aredo petroleum we will discuss that next on "bloomberg commodities edge." ♪

alix: i'm alix steel. this is "bloomberg commodities edge." it is time now for the brief, what you need to know on the alternative energy world. this week, bloomberg posted the -- posted the future of energy -- hosted the future of energy summit, where we heard from leaders in power, energy transportation, and finance. >> natural gas won't become part of the trade war. china and all countries around the world, energy security is such an important part of the overall security of the nation. i think that our administration

understands that. >> natural gas is one of the fastest-growing commodities. it will be an important part of the energy transition. it is what the conference is all about. also oil is pretty important. we think oil will peak at some point over the next 20 years. and then probably plateau. >> as we look to 2030, we see a system that has 80% of our resources carbon free. alix: here to talk about the is amy the summit graves. what was your biggest take away? amy: increased demand for flexibility. there is more demand for flexibility, contracts, and the increased p penetration of renewables is putting pressure on existing generators to provide flexibility and there is this debate over which

technology provides the flexibility. are there going to be winners and losers. alix: is there going to be a loser that will be build out and that brings me to firstenergy solutions being totally hammered and they basically want tj m to go in and buy whole energy from them to protect the grid and keep it reliable. what was the talk? amy: there was a lot of debate over firstenergy. more generally, federal intervention and competitive markets. as you mentioned, firstenergy asked the department of energy for this emergency intervention to save their: nuclear plant, -- coal and nuclear plant, which had been paid for multiple times by the repairs. tgm has some of the highest margins ever but they are still seeking the emergency support for their assets. alix: do people want it to be saved? what was the read?

amy: perry alluded there might be a strong support for needing coal and nuclear assets. although he referred to new england, the assets that firstenergy has, and new england does face some gas constraints, and they are heavily reliant on gas, and don't have the pipeline capacity to take that up to new england. there is probably more risk in new england, the question is, do we use that argument to justify supporting the assets that firstenergy has? alix: great stuff. amy, thank you for catching up with us. turning now to commodity in chief, we focus on one executive in the commodity world today, it is randy. let's take a closer look at the company. petroleum is a permian based oil company that delivered 17% production growth last year. this year, it is adding a fourth rate, completing as many as 65 net wells.

the problem is getting the oil out of the permian. the houston midland oil spread has blown out to nine dollars and pipelines are still up, leaving oil stuck in the middle of texas, instead of making its way down to the gulf coast to be exported. producers talk a good game and of expanding in the permian, but at what point does the shrinking production -- alix: i recently caught up with the ceo of lerado petroleum. randy: i think we would look to accelerating cash flow. alix: what these values are also banking on, takeaway capacity and premium will be so constrained that guys like you won't be able to drill and produce as much as you would like at $80 a barrel. what do you think about that? randy: this is interesting to me because we have seen this conversation in my career a number of times. i think the facts are, certainly on the midland side and the

delaware side of the permian, we did not anticipate this much production growth or magnitude -- in terms of actual magnitude as an industry. but, at laredo, we went to a lot of trouble to spend money on infrastructure, data, and spend t a lot of money making sure our we take our products on the that takenand see out of the basin and taken to the gulf coast and sell it there. alix: we've seen the houston midland spread a blowout $29. how many pipelines do you have and what is the capacity at going to? randy: we have firm transportation on two pipes taking oil out of the acreage to the gulf coast. we have 29,000 barrels a day of capacity and we are producing slightly less than that. we are in good shape of making sure our crude gets exposed to gulf coast pricing.

several years ago, there is a got as highint, it as $20 a barrel. we never saw the impact. we just up the crew to the gulf -- we just took our crude to the gulf coast. so, this is something one should almost expect in terms of we are finding lots of production and it takes the mainstream marketing guys -- they will get there and the problem will resolve itself, but there could be several quarters in which there is a problem. it really doesn't impact laredo. alix: what about for natural gas? some are saying prices could go to zero because there is no way to take it out, it is a byproduct and harder to control the production. randy: i think that is also something we have thought a lot about and plan for. alix: did you are firm contract -- a firm contracts -- did you

affirm contracts for that pipeline as well? randy: we sell our wet gas at the pipe head. we have two major pipes to take it to. there is 21 or so natural gas processing plant that we can do that to. those major buyers of our gas tell us they are in very good shape. if one has a problem, we take the surplus to the other. the interesting thing about it is, we don't see that being a problem with our two suppliers. the two people that buy our gas. we've also designed our system with the infield gatherings such that if it really got as bad as some people think it is getting, which i don't agree, we also have some capacity to go to the road commission and get permission to flare.

our natural gas is 10% or 15% of our revenue. we would hate to lose that by flaring. but that would not stop us from producing fuel. alix: when would you be at full capacity? >> with the additions they are making, and we verified this with the new pipe being built, there may be a window in the 2018 and first quarter or two of 2019 of them bumping up to capacity. after that, there is plenty of capacity. alix: here's what is on my commodity radar, all a's for the world's sixth largest producer of aluminum. they will report their first quarter results on wednesday and we find out how russia weighs the sanctions and potential tariffs and the premium we are seeing in the market. that does it for "bloomberg commodities edge." make sure to catch us each thursday, 1:00 p.m. new york time, 6:00 p.m. in london. ♪ this wi-fi is fast.

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jonathan: from new york city , to our viewers worldwide, i'm jonathan ferro with 30 minutes dedicated to fixed income. this is bloomberg "real yield." ♪ jonathan: coming up, investors exhausted from political narratives, from the trade war fears to geopolitical concerns. one thing washington can guarantee -- more debt. the cbo forecasts $1 trillion deficits are around the corner. the u.s. needs foreign investors to step up. this week's auction suggests they are taking on the -- sitting on the sidelines. we begin with a big issue, geopolitical risk. th