alix: the trade war reignites. lng and soybeans are driving deeper into the battle between u.s. and china as china raises tariffs on key commodities. driving into the future, electric buses and cars will take over the world faster than you think with china leading the way. the hotspots for oil. tensions flare in the persian gulf. saudi arabia confronts trouble in the strata for moose and a key pipeline. -- straight of hormuz and a key pipeline. where is the risk for oil? ♪ alix: welcome to bloomberg "commodities edge." 30 minutes focused on the companies, physical assets and trading behind the hottest commodities with the smartest

voices in the business. first, we kick it off with spot on, our take on the big stories. joining me from jacksonville, florida is a senior fellow at the atlantic council and author. joining me on set in new york is the head of oil and gas at credit suisse. our spotlight today is geopolitical tensions in the middle east. here what we know. the uss abraham lincoln and b-52 bombers are making their way to the strait of hormouz. two saudi vessels were sabotaged sunday, in waters off the uae. two days later, pumping stations connected with the pipeline in saudi arabia were hit by drones. the saudis blame it on rebels in yemen. president trump responded to comments about sending troops into the region. president trump would i do that? :absolutely. but we have no plans for that. hopefully, we will not plan for that. if we did it, we would send a hell of a lot more troops than that. alix: you have oil jumping on that news. is this a legit threat?

ellen: i think what we are seeing now is tensions are rising in the middle east between iran and saudi arabia. in terms of the actual threat to oil supplies, the events we saw, the sabotage of the ships and drone attack on the pipeline, didn't early do anything to oil production or oil transportation. that pipeline was barely out for 24 hours. what we are seeing is saudi arabia using this attack as a way to pin iran. we saw the deputy saudi defense minister, the brother of the crown prince, come out and say, basically the rebels and the iran revolutionary guard corps are the same people. they are talking about responding with strikes and newspapers called for a surgical attack. what we are seeing are rising tensions and that is now affecting oil prices. alix: from your opinion, how much geopolitical risk is in the oil price?

osmar: thanks for having me. in prior discussions with you, i pretty much said a couple of times i think the energy world pretty much ignores geopolitics. it's only in times of extreme crisis or perceived extreme crisis that you see a major move. i would argue there's a lot of other bigger news in the world right now, but the things you have to be careful about is the black swan event, because these countries are not necessarily in control of all of the various elements out there, including our own. secondly, it is always in a hotspot. this is a pretty tight space. anybody that flew over the straits of hormuz knows how narrow that is. it is still a very substantial part of the world's production and reserves. i think we have to be aware of it, i don't think it is a major crisis at this point. alix: oil prices tend to agree with you. if you look at brent time spreads versus the overall oil price, 1 to 3 months time

spreads were tightening, but that could be a supply issue versus the flight oil price. in order to shake the market, what would be a major risk or major crisis? ellen: i think we saw very minor, if only nothing, reaction to some of these events. in order to really bump up prices, we would have to see something like major troop movements to the middle east, not just a report may be considering a contingency plan. we would have to see major troops moving to the middle east. we would also have to see the united states confirming from the president or secretary of state, not just an unnamed official, confirming that iran was linked to the attacks and we are not getting that. i think oil markets are recognizing this and recognizing that this is a lot of drumming up the war drums and making things into a bigger issue than they actually are on the part of the saudis and iranians and other media. particularly the lebanese tv has

really played a big role in making this seem like a much bigger deal than it is. alix: fascinating point. osmar, if you look at the supply and demand of fundamentals, the back of the curve is not moving at all. if you are an oil company, what do you think? osmar: i don't think big oil companies generally react to short-term events. their planning is very long-term. they would make sure they have supply available from other locations, if necessary. again, you will have to run to refineries and those sorts of things, but i don't think they are terribly concerned. this is the nature -- part of of what happens running a major oil company. there are many more hotspots. alix: to be sure. venezuela is a huge one. my question becomes the backend of the curve. why has that stayed so stable when there is tightness, trade issues, are concerns out there not related to iran? osmar: i agree with what ellen said. this is not a major crisis at this point, so the market is not reacting to it.

it is not always just supply. it is demand. a lot of concern about demand. what could happen to the chinese economy, for example, and things like that. we have already had major supply issues. he mentioned venezuela. look how much their production has dropped. you have to look at it from a global perspective. i don't think the long end of the curve, for people who invest in that and the global energy companies and consumers are reacting because there is not anything major yet. i don't think we others are sending troops without much more evidence and much more escalation of activity. alix: irrespective of that, we brought up venezuela, the markets were already tight. we have not seen russia and saudi arabia ramp up production to make and offset some of the tightness we have seen. what is your read on that? ellen: russia has its own set of problems with this oil contamination it is dealing with in one of its major pipelines. they have had to curb their production to deal with that.

i do think all eyes should really be on the upcoming opec meeting. there's going to be a minor meeting this weekend of the joint ministerial monitoring committee meeting to look at how the opec deal is functioning and where production levels and oil stocks are at. i think everyone is going to be much more focused on what opec decides to do, whether russia and saudi arabia can keep the deal together or whether they go their separate ways. after that, that meeting happens on june 25. after that, if russia decides it is out, they could ramp up production by then. alix: you're talking to companies and clients all the time. what are they saying about the opec plus risk out there? what is the biggest concern? osmar: their concern is more global economy, consumption of the energy along various forms, not just oil or gas. i don't think they are that uptight about the supply.

the world is not short of oil, at this point. i am not saying it is overflowing, but there is a relative balance right now. absent a major change or shock, whether on the supply or demand side, i think they are running their business the way they normally do. alix: thank you, you guys. great to see both of you. coming up, crops in the trade crosshairs. farm commodities from pork to cotton is taking a nosedive after china saying it will raise tariffs on u.s. goods starting june 1. we are telling you what flaring trade tensions meet for farmers. there is a national crisis in china and it is spreading, hurting countries all across the globe. tyson foods says the consequences could last for years as the disease spreads. this is bloomberg "commodities edge." ♪

alix: i am alix steel and this is bloomberg "commodities edge." time for the data dig. we delve deep into the market trends of the week. first up, you have oil inventory numbers. overall, with the crude 5.4 billion barrels really pushed that oil into storages. cushing, i want to highlight the highest since their numbers in 2017. weatherford is filing for bankruptcy and they are not alone. overall, bankruptcies last year hit a four year low but they are rebounding this year, second only to those in discretionary consumer goods sector. definitely watch that space. and turning to trade, china is raising tariffs on u.s. lng imports. this could really hurt. this chart shows the breakeven price, which includes delivery, from projects around the world. the orange bars are the projects in the u.s. they are higher than any other

project elsewhere. this has substantial consequences for not only trade flows but the buildout of lng export facilities. i spoke to the chairman of tulirian and asked if he was concerned. >> this is a classic case of cutting your nose to spite your face. the $10 is going to be spent by chinese consumers, not anybody else. it's not a question of whether we want to export, we have to export. it is not simply an american issue. it is a global issue. if we don't export, we will add a million barrels per day of oil production per year for the next five years. alix: let's get into the ring. i'm joined by sterling smith. china canceled u.s. pork purchases and scaled back on soybeans. can they get it to zero?

sterling they can get it to : zero. the chinese have been very resolute and they cut soybean exports from 26 million tons. we have only sent them 6 million tons. absolutely they are going to be tight. the pork story is something that is growing and they may have to buy pork from us. or they will push global prices up. we are going to be the group of last resort for them. they are not going to want to aggressively buy from us until we get some sort of resolution with the trade problems. alix: cotton was down earlier in the week. soybeans hit a 10- year low. to compensate, did mr. asian wants a $15 billion aid package -- the administration wants a $15 billion aid package added onto the $12 million of subsidies. do farmers like it and does that help them? sterling: we have a more looming crisis and bigger problem on the farm situation. we are having severe planting difficulties. i was in omaha the last couple of days and there is still water left over from the floods in february. right now we only have 30% of the corn crop planted. we should have 66% planted. here in illinois, they only have about 10% planted.

in indiana, they only have two weeks left to put that crop in and it is not any better and we are looking at more rain. farmers are looking at not only losses from the soybean situation, they are looking at real crop losses with the corn when they may not be able to get corn planted. that may result in soybeans getting planted instead. so we have a very sensitive situation going on on the farm are now. alix: what is the dynamic? is there an extra soybean oversupply or corn shortage? sterling: i don't think you will see a corn shortage. you will see a reduced corn supply, which will raise prices a little bit. then, potentially if they do , plant soybeans, you can see an excess amount of soybeans, which we already have a record carry out this year and potentially a record next year. we could see a little better corn prices, which will help them a tiny bit, and noticeably worse bean prices putting the whole market out of balance. alix: sterling smith, thank you so much. really appreciate your perspective. time for the note of the week.

it comes to us from the iea and their world energy investment report. it showed flat spending on everything from green power to home insulation last year, and the number needs to grow. he says, "there are few shines to expect a shift to renewable technologies if they're not huge changes in regulatory policies. many investors are a bit tired of stop and go policies of the government." coming up on this program, a conocophillips chief technology officer shows us how his technology is helping drilling operations. coming up next on "commodities edge." ♪

alix: this is bloomberg "commodities edge." time for the bnef brief, that gives you in-depth analysis on clean energy, transport, and emerging technologies. passenger electric vehicle sales will rise from 2 million to 56 million by 2040 according to a new report by bloomberg nef. that outpaces internal combustion engines by 2038. joining me now from london is calling the catcher -- collin maccatcher from bloomberg nef. walk me through this inflection point we will see. collin: great to be on the show. what we have been doing over the last few years, we have been tracking electric vehicle sales and they have risen dramatically. you've gone from a few thousand to 2 million last year. each year, we try to do an exercise where we look at everything from battery costs,

to the amount of charging infrastructure being built all , of the policies in place, investments from the automakers. we piece that together into a long-term outlook and that is the numbers you quoted at the beginning. we are expecting a dramatic rise in passenger electric vehicle sales over the next two decades, but we also expect it to spread. not just passenger vehicles but also spreading into things like vans, light commercial vehicles, medium size commercial vehicles, and even into the heavy commercial vehicle segment. alix: let's talk about buses. you have a great chart that shows buses leading the ev segment. walk us through why that would be. colin: that is driven out of a big policy change from china. china -- many big chinese cities said we would fully replace our internal combustion engine bus fleet with electric buses by 2020. two of them have already completed that. several more will complete that next year. that is a big enough share of the global bus market to drag all of the numbers up. you are starting to see activity and europe and north america, an increasing number of cities

are making commitments to changing over their fleets, mostly driven by urban air quality concerns, but also by economics. these buses are in use a lot through the day. while in ettrick bus has a higher upfront sticker price, it has lower operating costs over time. there is a savings from an economic point of view as well. a lot of the pressure is coming from urban air quality. cities like london and other parts of europe especially. alix: we saw a chart showing the countries in the lead, china and then europe, they kind of vye for the lead in the world, and the rest of the world. and then the rest of the world. why is china gonna stay farther ahead? colin: china is the dominant force in this global push for electric vehicles. there is a few reasons for it. china set a number of targets around electrification that are pretty aggressive. it is doing that for different reasons. one is an industrial policy angle. trying to create new national champions that can compete on the global stage in the emerging electrical vehicle market. but also, things like reduce oil imports and this urban air

imports and this urban air -- imports and this urban air quality in big cities is also playing a role. there's a few different reasons for why china is pushing so hard. in europe, there is also a big push coming and we will see a lot more from european automakers in the 2020's because there is a european level target of reducing co2 emissions by 37.5% by 2030. to do that, you have to add plugs to your vehicles. it is very hard to get that level of efficiency improvement without moving toward electric. alix: a great report. now we turn to commodity in chief. we focus on an executive in the commodity world, today is the conocophillips cto. first, a closer look at the company. there's one big problem for any shale producer, fracking too hard too fast. it is the stress of a parent-child relationship. the first well you drill is the parent and any well drilled within 1000 feet in the same zone is a child.

a couple of bad things could happen. a loss of pressure. parent wells draw down reservoir pressure as they produce. when a child is fracked, it may not be as strong. a child's fluid gets mixed up with the parents', hurting production and reserve. it can be two fracks in the same layer of rock or two different , in different layers. in essence it becomes one big reservoir. enter conocophillips. they have big plans. the balkans are late cycle. the permian is early cycle where they are still working out how to drill the well. they're playing with different kind of techniques to increase the amount of oil they get out of the well and contain the parent-child well so there is less interaction as big oil

becomes big tech. i recently caught up with greg and asked him how technology was improving drilling performance. greg: we are seeing big impacts. it is something where you don't have to wait multiple years to test an idea. the thing that really helped, is that we went from a world where it took maybe half a decade to a decade to bring a concept or technology out of the lab and into the field, to a place where we are doing it in a matter of months. alix: some of the buzzwords are things like spacing, how far can you space them apart, do it remotely and drill remotely, recoveries increasing the amount of oil you get out. what are technologies you're looking at to help in those areas? greg: we have been able to put together technologies around completion design, stacking of the wells or how we lay them out geometrically in the subsurface. by doing that we are increasing

the recovery factory. we are getting over 20% recovery factor in eagle for, which is astronomical. most people were thinking this was a single digit type of rock or single digit type of recovery you would get out of these rocks and we find we are able to do much more than that by combining a number of different technologies. alix: that leads me to where do you see the savings? do you get more out of the ground or is the payback just lower cash costs? greg: we use a metric that tries to take into account what we spend to produce a barrel of oil and how many barrels we produce per well. we have been able to find ways to do all of those things. we get more per well, spending less money doing operations we did certain ways a few years ago. when you look at the industry, the pace of advancement has been quite rapid, and the scale of the improvements are quite large. alix: how easy would it be to

take the technology and move it to the permian or somewhere else? or outside the u.s.? what is the through-line? greg: most of the technology are ones we can use across the entire unconventional reservoir space. there are some which are very basin specific, but in general, most of what we develop we can use whole or in part as we move to other areas. conocophillips has a big position in the eagle ford, the bakken, the permian. we are finding ways to use those technologies in all of those areas and new areas. alix: what about digital? greg: we break it into three big buckets. one is data analytics. the second is back office focus, merging digital technologies. those are things like digital robotics, inventory, management, things like that. accounting principles. we are also looking at operations-focused emerging digital technologies. all of those areas are areas that are maturing rapidly. we are working with technology startup companies, with the big

cloud providers, aws, microsoft, google. working with traditional emp service companies. we are taking a best in breed approach so we are not locking ourselves down to just one company, but really trying to find the best. alix: that was my interview with greg about -- level, conocophillips cto. it is more sought after than dorothy's ruby slippers. ruby chocolate is joining the ranks of dark, milk, and white chocolate. the rosie treat will soon be sown by a chicago-based luxury company. nestle was the first adding it to its kit kat bars in japan. ruby chocolate is a cocoa bean with the natural berry flavor found in the ivory coast, ecuador, and brazil. here in the u.s., the fda has not approved it. fingers crossed this has a sweet ending. that does it for bloomberg "commodities edge." for next week, tune in on sunday with the joint oil meeting with

opec-plus. we also have bp and shell's annual meeting. don't miss that. catch us every thursday at 1:00 p.m. new york time. this is bloomberg. ♪

at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

taylor: welcome to "bloomberg businessweek." i'm taylor riggs come in for carol massar. jason: i'm jason kelly. we are here at bloomberg headquarters in new york. taylor: this week, the costly farewell brexit is having on business. jason: also, the price of all the wrong bets that a u.s.-china trade war would be short. taylor: and the global cover story, we work is expanding.