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00:00STUDY PRODUCTION DECLINES WE'RE SEEING IN THE U.S. AND OTHER PARTS OF THE WORLD. I THINK FOR THE FIRST TIME IN EIGHT QUARTERS OR SO, WE WILL SEE A BALANCED GLOBAL MARKET THIS FOURTH QUARTER. AND THAT WILL PROVIDE A LITTLE SUPPORT TO PRICES. WE SEE BRIDGE GETTING BACK TO THE MID-50'S. -- BRENT BACK INTO THE MID 50'S. I THINK FEARS ARE DRIVING OIL PRICES LOWER TODAY ON THE BACK OF THAT JOBS REPORT YOU WERE TALKING ABOUT. PIMM: FRANCISCO, I WANT TO PUSH YOU ON THE IDEA THERE IS A PRODUCTION CUT BACK. WHO SPECIFICALLY IS PUMPING LESS OIL? LET'S LEAVE OUT THE U.S. FOR A MOMENT. >> WE ARE SAYING PRODUCTION DECLINES IN SOME PARTS OF SOUTH AMERICA AND IN THE U.S., AS YOU POINTED OUT. THE ONE PART OF THE WORLD INCREASING IS THE MIDDLE EAST. THAT IS WHERE YOU ARE SEEING THE GROWTH. THE FLIPSIDE IS, DEMAND HAS BEEN VERY STRONG. WE HAVE BEEN RUNNING AT ROUGHLY 1.7 MILLION BARRELS A DAY OF DEMAND GROWTH, WHICH IS THE SECOND STRONGEST RATE IN MORE THAN A DECADE. THAT EFFECTIVELY IS PROVIDING A LITTLE SUPPORT TO PRICES. DEMAND IS VERY, VERY ROBUST YEAR. PIMM: CAPITAL SPENDING ON WELL PRODUCTION COMPANIES SEEMS TO TELL A STORY THAT THEY DON'T THINK PRODUCTION IS COMING BACK ANYTIME SOON. YOUR THOUGHTS? >> I AGREE. I THINK THE CUTS HAVE BEEN DEEP. A LOT OF COMPANIES ARE IN THE INTENSIVE CARE UNIT, SO TO SPEAK. FRANKLY, WITH CALENDAR 2016 PRICES FOR OIL COMING DOWN FOR DEBBIE TI, BELOW $50 A BARREL, THEY'RE NOT MANY COMPANIES THAT CAN MAKE NUMBERS WORK AT THIS LEVEL. WE ARE SEEING A BIG CHANGE IN DISCIPLINE. COMPANIES ARE TALKING ABOUT MAXIMIZING RETURNS, MAXIMIZING PRODUCTION AND THAT IS A BIG CHANGE -- RATHER THAN MAXIMIZING PRODUCTION, AND THAT IS A BIG CHANGE FROM A YEAR AGO WERE COVERED IS WERE JUST TALKING ABOUT RELENTLESS GROWTH. IT IS ABOUT MAKING MONEY, NOT SO MUCH ABOUT GROWING PRODUCTION, AND NO WILL LEAD TO LOWER OUTPUT NEXT YEAR ,TOO. PIMM: FRANCISCO, NOT TO PUT YOU ON THE SPOT FOR THE OIL COMPANIES, BUT WHY HAVE THEY WAITED WILL REACHING $44 A BARREL IN ORDER TO DO THIS? THEY'RE SUPPOSED TO BE THE EXPERTS IN THIS, AREN'T THEY? >> LOOK, I DON'T THINK IT IS THE JOB OF OIL COMPANIES TO CALL THE OIL PRICE. THEIR JOB IS TO LOCALS IN THE GROUND AND GET THE COMMODITY TO MARKET. JUST THEIR JOB IS TO POKE HOLES IN THE GROUND AND GET THE COMMODITY TO MARKET. MANY DECIDED TO START SLASHING CAPEX FOR 2015 AND WE'VE SEEN CONTINUED REDUCTIONS THROUGHOUT THE COURSE OF THIS YEAR AS PRICES CONTINUE TO GO LOWER. BUT, YOU KNOW, THERE IS OF COURSE BEEN A LOT OF INVESTOR OPTIMISM AND THE SECOND QUARTER WHEN OIL REBOUNDED TO $60 A BARREL, AND THAT GAVE COMPANIES A SECOND WIND OF LIFE. AND SOME OF THEM DECIDED TO POSTPONE CAPEX CUTS. THAT HAS BEEN ONE WITH WTI HEADING BACK LOWER. IT IS A CHOPPY MARKET. I THINK WE ARE IN A SEESAW TYPE OF MARKET ENVIRONMENT, AND THAT IS ULTIMATELY WAS FINALLY LEADING COMPANIES TO CAPITULATE ON HIGHER PRICES AND SLASHING CAPEX NOW. WE WILL SEE MORE OF THAT. PIMM: FRANCISCO, NOW TURNING TO NATURAL GAS, TRADING AROUND TWO DOLLARS $.50 MILLION BTU. WHAT IS YOUR OUTLOOK FOR NET GAS? >> IT ACTUALLY LOOKS OK TO US FOR NEXT YEAR. PRODUCTION IS PRETTY FLAT AT THESE LEVELS. WE HAVE BEEN IN A FLATISH ENVIRONMENT FOR QUITE SOME TIME. WE THINK PRODUCTION WILL DECLINE A LITTLE IN THE NEXT YEAR ON THE BACK OF THOSE ASSOCIATED GAS PRODUCTION DECLINES. EFFECTIVELY, THE GAS THAT COMES FROM OIL DRILLING ACTIVITY IN THE U.S. WILL COME DOWN NEXT YEAR. REMEMBER, DEMAND FOR GAS IN THE U.S. WILL BE PRETTY SOLID THROUGHOUT THE NEXT 12 MONTHS. WE HAVE EXPORTS TO MEXICO, LNG RAMPING UP, A LOT OF PETROCHEMICAL ACTIVITY, AMMONIA PLANTS COMING ONLINE. AND THEN WE'RE GOING TO SEE A BIG REDUCTION IN COAL-FIRED GENERATION CAPACITY, WHICH IS SCHEDULED TO HAPPEN BECAUSE OF NEW REGULATIONS. SO I THINK A LOT OF THAT IS GOING TO BE FELT GAS CONSUMPTION AT A TIME PRODUCTION IS FLAT, AND THAT WILL HELP US GET BACK ABOUT THREE DOLLARS INTO THE END OF THE YEAR. PIMM: ALONG THE OIL SUPPLY CHAIN, ENERGY SUPPLY 10, WHERE IS THE BEST INVESTMENT RIGHT NOW? >> AS I SAID BEFORE, THE MARKET PROBABLY IS LOOKING AT A RALLY, INCLUDING THE SHORT RUN. SAME FOR GAS. I THINK GAS HAS BEEN TAKING A BIG BEATING, SO WE'LL PROBABLY SEE A BIT OF A BOUNCE. I CANNOT SEE THAT WINTER SEASONAL TRADE BEING ATTRACTIVE, BUT THE MOST ATTRACTIVE COMMODITY IN THE ENERGY SPACE IS PROBABLY GOING TO REMEMBER -- REMAINED GASOLINE INTO NEXT SUMMER. THAT IS OUR NEXT IDEA GOING LONG GASOLINE, SHORT HEATING OIL AS A TRADE FOR NEXT SUMMER. THAT IS PROBABLY WHERE I WOULD HAVE THE HIGHEST CONVICTION HERE. PIMM: FRANCISCO BLANCH, THANK YOU. GASOLINE PRICES ON THE NYMEX DOWN ABOUT OVER 3%. PRESIDENT VLADIMIR PUTIN'S

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Oil Producers Moving to Balance Production, Demand

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