alix: pressure mounts from oil companies to pay off its debt, freezing production anymore. potentially 98 dollar prices. blockchain for higher. we speak to the ceo of ddo who is working with energy companies to use blockchain to optimize costs and maximize trading. ♪ alix: i'm alix steel and welcome to "bloomberg: commodities edge." it's 30 minutes to focus on companies, physical assets, and trading from the smartest voices

in the business. let's kick it off with a spot on venezuela. joining me is the capital markets manager and the founding director of columbia's tsipras center on global energy policy. he was also energy adviser to president obama. welcome. great to see you. let's dive in here. venezuela has the largest oil reserves in the world but they are producing 1.4 million barrels a day, the lowest since the 1950's. jason, how much is this responsible for the oil rally? jason: venezuela has been declining for a while to $2.4 million. for a while to 2.4 million. that is not a surprise but the , pace that has been declining, what is happening with conoco seizing assets, the likelihood of even faster downside risk is new and coming on top of the iran sanctions, opec recommitting to the deal and trouble ramping up shale,

because the infrastructure restraints. these are important factors in ripping up prices. alix: let's talk about the conoco thing. that's what exacerbates the issue. conoco was awarded $2 billion and the way they went about it was seizing assets in the caribbean from venezuela. talk to me about the significance of why this was so important. russ: basically, it is about 24% of venezuela's exports production. it goes through the ports and refineries and storage tanks that have been seized by conoco, pending formal judgment. so it puts a crimp in their style. they used those because they didn't have enough storage in venezuela and they didn't have enough mixing capability, so they needed to import diluents to mix with their heavy oil to make it into a salable blend. losing that infrastructure and ability to access it was a great blow to a beleaguered nation. alix: and you can see it's going to get worse.

if you take a look at what we are seeing with this map, these are the tankers over venezuela. they have been turning back tankers, because they don't want conoco to seize their oil. some of them are stuck in ports and some are floating around the coast of venezuela. jason, how does that play out? how does this go from 1.4 million barrels a day from bad to worse? jason: those tankers will probably be able to find a home somewhere, maybe as some sort of discount. but this is contributing to the freefall in production. you see companies pulling out, security concerns. they arrested workers for chevron. the companies are pulling back. they need their jv partners, about two thirds of their production. and the possibility after the election of increased sanctions from the united states government on the sale of venezuelan crude, or the like u.s. oil mixing with heavy crude. that risk is lower now because they are in freefall and

in some sense conoco is doing the work for the sanctions of the u.s. government, but that is still a risk, too. alix: let's talk about that. we export a lot of oil from venezuela. it is heavy oil. we don't have heavy oil in the u.s. with the elections on may 20, do you think we will see a re-implementation of sanctions? jason: if you asked me a few months ago, we would have probably expected sanctions. now i think the voices we are hearing in treasury and state are saying exactly as jason said, that conoco and the corruption and incompetence of venezuelans is doing to themselves the same things that sanctions would have done and bringing all of their production to a halt. this was a nation producing 3.5 million barrels a day when sean let's came into office , and now according to opec

stats they are producing 1.4, less than half of what they were producing. alix: and the reserves was 300 million barrels. >> 600,000 is being sold for revenue. the rest is being used to repay debt. alix: an easy way to go about doing this would be to pay the $2 billion to conoco? why would this not work or create more problems? jason: it's interesting. they say history may not repeat itself, but it does rhyme. in 1902, the italians, germans, and british put blockades on venezuela because they would not repay its debts from the revolution, but also some bond debts. it ended up being resolved, and the u.s. sent their fleet to resolve it. now we are in the same situation. 18 ships that have pulled back, 28 ships to the other main export port. basically, they are in bad

, bad, bad shape. alix: and the winds for conoco, another company can come in and say, i'm going to do the same thing. you don't get the sovereign rights you would as a country, like argentina. jason, i'm the u.s., i'm opec. i am saudi arabia. what do i do about this? jason: the u.s. is struggling to figure out what to do. they were poised to put in place additional sanctions. that's been pulled back because of the concerns of humanitarian impacts of imposing additional economic pain. it's going to be interesting to see what the saudi's and russians do at the opec meeting come june. we had the u.s. threatened to take more oil off the market with iranian sanctions. then the saudis stated we are committed to market stability and concerned about the health of the global economy. it was a shift in tone. not only are we trying to draw down the five-year inventories,

we want to make sure price was high enough to incentivize additional investments. they are clearly getting signals from the u.s. government that people, and we saw this in trump's tweet, they are concerned about high prices going into a election. november the saudis are looking for a goldilocks price. they want a higher price for their domestic budget. they are concerned about future investment in supply. they are worried about prices going too high, not only because the u.s. would not be happy, but also demand destruction. alix: any investments in venezuela that you like? russ: keep your hands in your pocket at the moment. but there will be. alix: russ is saying it's not over and they are waiting for the other shoe to drop on venezuela. jason says there are big risks on venezuela and production and it'll be about what the saudis decide in thank you both so june. much, great to see you. take a look at the big commodity moves of the week. it is not just about oil. cocoa actually down by 4%.

good weather means more crop, bad for prices. lumber on a tear. coming up, it's the iran fallout. bob dudley gave his take this week. bob: i think what we've seen is a withdrawal from the agreement, it seems to be the beginning of another negotiation of some kind, but when you couldn't leak one million barrels on the market, it would affect things. ♪

alix: i'm alix steel. this is bloomberg "commodity's dge."-- commodities e time for the data day, where we dig into market trends. the numbers showed a build everywhere of 106 billion cubic feet. but the really interesting number was the oil inventory number. oil exports were over 200 -- were over two and a million

half barrels a day. we saw the the second largest gasoline drop so far is exports at about one million barrels. this is a total inventory drag for gasoline, as well as oil. another data point that caught my eye was how much opec and iea disagreed on demand. here's the deal, the iea cut demand growth forecast to 1.4 million barrels of oil a day in this year blaming higher prices eating into demand. opec took another route. the increased its call on demand to million barrels of oil 1.6 a day because of strong demand in the first quarter. who is going to be right? it depends on how long we hold $80 a barrel. it's been a week since president trump withdrew from the iran nuclear deal and europe is not taking it lying down. german chancellor merkel says everybody in the eu agrees it's not perfect, but they should still remain in this agreement and we should do further negotiations based on this agreement. joining me is bloomberg's chief energy correspondent.

javier, great to see you. how many times do you say agreement in one statement? what options is europe considering to get around these sanctions? javier: they said they are thinking about staying on banks and the central banks to bypass the sanctions from the u.s. but the u.s. has responded to this thinking that we are hearing from diplomats, just putting them as a terrorist supporter. the governor of the central bank of iran. it's getting difficult for europe to bypass any of the sanctions and if capitals get any agreement, what we heard yesterday from total, one of the biggest oil companies in the world, 90% of funding comes in dollars and 30% of shareholders are in the united states. we have lots of assets in the u.s. it was a message of total, we are not going to risk getting in trouble with the white house. alix: nevertheless, countries like italy still importing from iran. if you look at india, china, italy, they are not paring back their imports.

i've also heard the blocking statutes get around what the u.s. is doing. how can that play into it? javier: the blocking statute is something legislation can force national companies not to provide any information to the united states for what they are doing. it is really a way for the french to tell total to buy oil from iran, just don't tell the americans you are doing it. i don't think it's going to work. seriously, that is not going to work. we can't track results arriving into refineries in france. americans are going to do it. and a senior oil trader at one of the big oil companies, one ,hing they're worried about keep in mind our capitals in listening europe, berlin, london, and we continue to carry on, what if trump one morning wakes up and decides to shame the name of our company? they are helping iran. share prices will go down.

we cannot afford that. alix: the twitter fear. javier, great to see you. three charts, three traits of the week. i want to kick it off with soybeans. china importing more from brazil and russia. does that leave the u.s. out in the cold? joining me now is michael from bloomberg intelligence. you can see prices going nowhere, exports up. do you think the u.s. is left out in the cold? michael: no. alix: you like the beans. michael: you can see in the chart, prices are so low. that low price and the grain index is the narrowest range, narrowest 12 month range, ever in the history of the index. the market is ready to break out. yes, exports are a risk but we don't export a lot of beans to china. china annually imports 100 million tons a year. brazil exports 70 million tons. we export 50 million. the vast majority are imported

from brazil. our portion is declining at 30%. in brazil, it is now around 50%. that's how big the market is. it's becoming demand driven. that is why we are talking about may and june. weather. when the weather starts kicking in. if you get hot and dry in august, you know what that means. alix: let's talk about other breakouts. you look at inflation versus the bloomberg commodity index. 10-year breakevens breaking out. where is the bcom? michael: it is getting there. the highest correlation since its inception is crude oil and energy. number two is cpi, .71 analyzed since 1971. the stock market is around .0. it is not correlated. it's just a matter of time. it is also related. beans are ready to break out. we will talk about lumber soon so you can see what is happening in energy. commodities have been beat up so much.

they are just catching up. me being a commodity guy compared to stock markets, it is kind of like an aging ball. alix: lumber, more room to run? how much? michael: that i don't know. alix: record highs. michael: it indicative of commodities. it is ready to break out. lumber is rallying. it is less for demand reasons. soybeans i am seeing demand. lumber is more supply issues out of canada and transportation. for me, it's a very slightly traded commodity. it is not in the major commodity index. it is a bit off the radar. it's not going the right way and where it should be. the economy is picking up. demand. alix: lumber, burning up. thank you very much. coming up, dominic mccann, he ceo of btl group will tell us how energy companies are using blockchain to cut their costs. that is next. ♪

alix: i'm alix steel. this is "bloomberg: commodities edge" and it's time for the brief, everything you need to know about alternative energy. edp surging the most in a decade after china makes an offer for almost $11 billion. edp mainly builds wind farms, hydro plants, and expanded in brazil. what is the problem? what was the problem with the premium? >> it was a lowball bid, about

7.76% him on their stock prices. most of the utility premiums acquired since january 2017 have been in the range of 23%, so it's pretty low. not a surprise it was rejected. also that they made the bid. they are facing a shooting pool -- facing a shrinking pool of profitable assets and china. it's probably an opening bid and they are going to come back with a higher offer. alix: they are buying full companies, not just an asset. that is unusual, right? >> that is unusual. in the u.s. there has been more focused on investors coming in buying individual assets. one off one project. the return on those have come down because there is so much competition for regulated returns. now what you are seeing is increased interest by utilities and by investors in portfolio, including a development return on those assets.

alix: now let's turn to one commodities executive. today, it is dominic mccann from btl. let's take a closer look at the blockchain and energy companies. >> it could be the biggest game changer in the oil world. blockchain. not bitcoin which reached $17,000 and then crashed, it is the technology behind it, the giant data keeper. here's how it works. you are drilling a well. you wait until the drill fails and then you call your services company and get a new one. imagine you have a smart contract that monitors the work you are doing. the oil service company looks at your well's intensity and vibrations, knows you will need a new drill, and the company gets it to you before the old one gives out. you save time and money.

oil is interested. oil services companies have invested in jvs, acquisitions, and r&d. other big oil companies, banks, and trading houses teamed up to create a blockchain platform, which could be running by the end of 2018. here's the catch. you have to pay to play. the technology will only work if both sides have it. like a fax machine. the front facing component can be different, but it has to be blockchain behind it and competition is fierce. alix: joining us is dominic thatn, btl group ceo , completed a pilot with eni and bp. great to see you here. what did you learn from that pilot? dominic: we sought to eliminate reconciliations and the first interest between the companies you mentioned in a matter of weeks. it could write a back contract

and take out a huge amount of the back market costs. now you have nine companies who are expanding the scope of our platform, reconciling the trade and invoicing, as well. jason: when you're taking out the back office, how much cost reduction did you see? dominic: conservative estimates between 30-40%. that's just for gas trade. the beauty of a smart contract is how simple it is in its coding. it's very easily amended to be in oil, power trade, electricity. once you have the foundations of that blockchain put in place, it is amending a smart contract for any is straightforward. alix: what you are looking at is how it will wind up helping you facilitate that trade. as i mentioned, you have to pay to play. if you want to trade with me, i have to have the technology. is that going to be a crimp to any kind of adoption rate? dominic: the future is about inter-availability. we run a blockchain insect

private and scalable. within that consortium, you can run a light instance without watching the smaller players coming in the size of total. our gas plan can run on blockchain and still yield benefits. we are going to try to make it as slight touch as possible and affordable. alix: how much interest are you getting from these guys? dominic: not just the trading discussion of cost, it is new technology. for us, this is a technology platform. it is not just about blockchain. we have blockchain behind it but how much you could read so much about and deal with integration security cost, fiber security, before he got cut off talking the how you address that. blockchain is the first step to talk that level of security. alix: how fast do you think it will go? dominic: we are demoing the final product at the moment to that consortium. the intent is we market it to other companies first.

there are thousands of traders in europe operating in the same framework. once the foundations are built, the nine companies, including us, look to go into the market, -- and market that. i the end of the year we will , have live trades within the platform. alix: live trades are incredible. you can also make technology better. if i'm using you as a tanker, i can see how efficient you are, how much you ship, the route to take. how does that cut costs, as well? not just back office? dominic: that's application development. it's the integration with other systems. as a foundation technology platform, it has inherent security behind it. you don't need any intermediary points. that is the point you get rid of the of blockchain, right? getting rid of the middleman and the costs. the applications, especially around trade finance and bigger plays, you will see applications

built on trusted blockchains that are not in the crypto market. they are foundational financial technology programs. alix: great to get the -- great to see you. here's what's on my commodity radar. may 20, venezuelan presidential elections. i have literally been watching this for weeks, pivotal to the oil market and the economy of venezuela. lots of annual meetings coming up. monday you have bp's annual meeting. ell's annual general meeting. wednesday china releases commodity trade data for april. how much oil are they importing and what are they doing with copper? property prices have been slowing down. their property market not as strong. how are they dealing with that? thursday, st. petersburg in international economic forum. some of the big guys are going to be there. what do they say about the state of the commodity world? that does it for "bloomberg: commodities edge."

make sure to catch us each thursday at 1:00 p.m. new york time and 6:00 p.m. in london. ♪

jonathan: from new york city for our viewers worldwide, i'm jonathan ferro with 30 minutes dedicated to fixed income. this is "bloomberg real yield." coming up, the week belongs to the treasury bears. yields breaking out to the highest level since 2011. the italian bond market adjusting to a populist government determined to spend more. and e.m. central-bank credibility very much in question. just who is turkey's central bank governor -- the governor himself, or president erdogan? we begin with a break -- big issues treasury yields breaking , out to new highs. >> short-term, yields are goin