Physical assets, and the 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 story of the week. We want to take a look at tariffs and aluminum premiums. Molson coors is among the companies asking the u. S. Government to investigate the way aluminum premiums are set. The premium should reflect transportation and handling cost and is up 78 since 2018. Raising costs for these companies. Earlier i spoke to the senior director of Global Packaging at molson coors, and asked about the problem with premium pricing. We cannot pierce the veil here, so to speak. We are paying tens of millions of dollars, seeing others throughout the aluminum supply chain are getting those gains. If you look at can sheets, we buy cans for our beer cans. Can sheet is made up of 90 of the aluminum used for can sheet should not carry a tariff. That is because you have 70 of an aluminum can is recycled content. Section 232 excludes recycled content. On top of that, with 232 being lifted off of canadian aluminum, we estimate 90 of the aluminum in can sheet should not have a tariff but we are paying as if 100 of the aluminum in can sheet has a tariff. Alix do you have a read on what your premium should actually be based on the supply and demand in the market . The premium should not represent supply and demand but the logistical cost. There should be a duty paid, and duty unpaid on premium. When you are paying the tariff, you pay the duty paid. When you are not paying the tariff, you pay the duty unpaid. Alix do you have any visibility into what premiums will be here in the next six months . I am here at the aluminum conference in chicago now, and the prediction is they believe premiums may be holding steady. Our question is why . Logistical costs are decreasing, lme has decreased, so if the premium carries the tariff in it, as lme falls, the premium should fall as well. Alix molson coors wants to lead an investigation into premium pricing. What can you tell me about that . You dont have to take our word for it. In the story published by bloomberg yesterday, secretary wilbur ross had some great questions. He said the fact that aluminums price is going up, it does not seem to justify a huge increase in the midwest premium. The secretary himself is saying he has questions about the increase in the premium. Since we are not getting those answers, that is the reason for the request for investigation. Alix they had a response to the article saying, what miller coors appears to have a problem with is the price of the market, not the data itself. The data has not been challenged itself. What do you say to that . Our issue is not about the cost. Our issue is about transparency. We believe that the price that we are paying should reflect the actual cost, drivers in the market. We believe that is not happening today. Alix that was my interview with jamie from molson coors. Also looking at oil. Tariff and trade fears hitting the commodity as well. Joining me is ed morse of global head of commodity at citigroup. A tumultuous week, prices falling down 20 from the april highs. A big part of that was the inventory, a huge build we saw, the biggest since 1990. Is it demand or supply . I think it is mood. I think it is turbulence in the markets that are the main driver. You can see it in financial flows and other market indicators. U. S. Inventories are building. This ought not to be a surprise. Theres an awful lot of growth in petroleum in the u. S. And a lot of bottlenecks to get into the market. The result is a build in inventory. That is pushing up to over 50 Million Barrels. It was less than half of that a year ago. We expect it will drive up a lot more than that until those pipelines come into play somewhere in the third quarter. Meanwhile, the rest of the world is tight. If you look at the brent or dubai forward curve, oil is scarce. We are moving into a season in which refinery demand for crude oil is growing, somewhere by 300 and 400 Million Barrels a day between last month and the middle of august. The physical markets are showing a different sign from where the Financial Markets are. Alix at the rbc conference, they were speaking. It felt like a mario draghi moment. He said there has been a significant change in Market Sentiment and Financial Markets. This will all play into our calculations in the upcoming ministerial meetings. What was your interpretation of that . They are watching closely. They are looking at where the financial flows are, i think they are very well aware. They all follow Financial Markets closely. They are seeing it is Spring Loaded at the moment, where you draw about all the longs. It will not get much shorter than it currently is. It looks like it looked as far as Market Positioning on christmas eve. Look at where it went after that. There is a caution saying we dont have to put more oil back in the market. Theres not quite a hint, but maybe there is one that we can take some oil out of the market. I would not be surprised if i hear some chatter about taking oil out of the market. We saw president putin saying that we think 60, 65 brent is a good price. We can put more oil in the market. There is a difference of view in opec plus. I think that we will see more noise coming out from both sides of that. Alix you are still sticking to the price point of 78 for brent. What kind of volatility do we see in a shorter term when we have opec and things can turn on a tweet . Volatility has spiked tremendously. It is at 40 vol points, about double where it was a month and a half ago. The market is becoming significantly more volatile. We think its an opportunity to buy and sell volatility. Sell volatility rather, just as its an opportunity to buy options on a higher price. Alix when do you think the market will believe that refiners will come back and that there will be more demand . What will it take for the Financial Markets to trust a rally in oil . I think we are at the bottom now. It is always hard to say you are exactly at the bottom. Brent is flirting with the 60 number. All signs are is that Market Sentiment is changing. Our discussions with clients indicate the Investor Community looks at this as a buying opportunity. Certainly by the end of the month we should see refinery runs going up. People may be paying more attention to it. Alix thank you so much, ed morse. You will be sticking with us. This is bloombergs commodities edge. Alix im alix steel. This is bloomberg commodities edge. Time for the data dig. We delve deep into the Market Trends of the week. First, big waste. Oil drillers in the permian florida record, 661 million cubic feet in the first quarter. There are not enough pipelines so companies have no choice but to vent that gas, and that could supply 4 million u. S. Homes. President trump keeps saying money from chinese tariffs is going into u. S. Coffers, but it may be going to farmers. This is how much the u. S. Is making from tariffs, and this is payments made to farmers hurt by the trade war. For this year and last, those payments could be 130 of the total tariffs collected from chinese trade. Speaking of china, pig fever is running rampant in the region. This shows the african swine fever outbreaks in asia by month. The red highlights may, you can see it spreading and getting worse. 1. 1 million hogs in china have been culled to stop the spread of the virus. You have trade tensions, central bank dovishness and equity selloff, all leading to a rally in gold. Prices posted their biggest fixed a rally in more than two years. Thomas kaplan, cio of electro group, weighs in. Gold is the only currency that cannot be printed. So when you have central bankers trying to debase their currencies, and the Mining Companies cannot find it, you have an interesting currency. When you own gold, it is what it is. You own it. Alix ed morse with citigroup is still with us. Do you want to own gold here . Ed absolutely. We are calling for an average price this quarter, the price is just about where it is trading at today. Gold quarter to date, average is 1290. In order to meet our average, gold will need to go to 1350, 1360 for the rest of june. We are sticking with that call. Alix can you own oil and gold at the same time . Ed who will prevent you . Alix i mean in terms of if oil is rallying and then gold is the safe haven asset, how do you square the two . Ed gold is also a wildcard asset, not just a safe haven asset. Oil right now is a wildcard asset. They both are predicated upon turbulence in the global market. I think it is a very good buy. The positioning in both gold and oil is kind of identical. We are at a point where they are both springloaded to charge up, if you look at where positioning is on a chart that you may have. Alix we can bring up the chart, it shows gold was very unloved for a while but now you have positions coming in. What does that tell you . Ed the positioning is so low by historical measures, getting back to normal is going to be significantly higher. That positioning will be lengthy. The market is short, well below historical average of positioning. That means it is springloaded, as is the oil market. Alix if that is a hedge, what do you do with copper . China also very much embroiled in the trade war, subject to fluctuations in dollaryuan. How do you look at that market . Ed we are pretty neutral. It will be dependent on a bunch of things, not just what the fed does, but the g20 meeting. The u. S. China trade war. It is very binary at the moment. We dont think the price can go down much more, although what happens with the renminbi, which is related to the trade war, partly related to what the fed may or may not do, then renminbi goes down against the dollar, copper will likely follow. If it goes up or sentiment goes up with the interim peace on trade war, copper could be selling at 7,000 a ton. Rather than 58 a ton. The bulk side is more compelling, not very expensive to buy your way into it. It is another potential bull story. It really is tied to whatever the u. S. President thinks he wants to do on the trade war, and how china reacts to it. Alix fair enough. Is there another metal that has the same kind of characteristics that you are watching . Ed i think dr. Copper is dr. Copper. There are other attributes and aluminum and palladium, but copper is the one. Alix always good to have you, ed morse, global head of Commodities Strategy at citi research. Speaking of metals, our note of the week comes from interior secretary David Bernhard on developing rare earth metals in the u. S. They write, as with our energy security, the Trump Administration is dedicated to ensuring we are never held hostage to foreign powers for the Natural Resources critical to our National Security and economic growth. Can that supply come up fast enough, though . Coming up, vicki hollub, Occidental Petroleum president and ceo, talking about the Technology Behind the companys production growth. We discussed next on commodities edge. Alix im alix steel. This is bloombergs commodities edge. Time for the bnef brief, which gives indepth analysis on clean energy, transport, commodities, and emerging technologies. Five of the top automakers have reduced emissions from their supply chains since 2015. Gm leads the way. Joining me now is kyle harrison. We have a chart that shows emissions from all the big auto companies. What did you learn in your analysis . Kyle Companies Like renault and General Motors have had dramatic reductions in the emissions intensity in their supply chain. The reason automakers are targeting their suppliers is the size, complexity, and the resource supply chain. The supply chain for the top 10 automakers, 319 Million Metric Tons of co2 on an annual basis. This is roughly seven times greater than the top 10 automakers amid themselves. If you can get your suppliers to reduce their water consumption, electricity demand, those are savings that roll back up to the automakers themselves. Alix how do these Car Companies get the supply chain to do that . Kyle the two areas weve seen the most development is auditing and supply selection. Lots of automakers have elaborate supply chains, sustainability auditing programs, where they will proactively collect data on their suppliers. You are now seeing major suppliers have very elaborate Sustainability Strategies internally, and they are pushing that down further to the supply chain. These Companies Face the risk of losing business and retaining contracts if they dont pick up the slack in sustainability. Alix this chart kind of shows that. What does this tell you in terms of which are more compliant with esg, and which ones are not . Kyle a lot of these companies derive billions of dollars, and this is just from the top 10 automakers. Alix they need to do what the automakers tell them if they want to keep the business. Kyle exactly. If you have your top customers they need to adopt sustainability practices, these suppliers have to go ahead and comply with that. Alix what do the automakers get out of it . They can tell their shareholders about it, can sell a zero emissions car . Kyle one of the big drivers is savings. If you can get suppliers to reduce resource consumption, those savings from the supply chain roll back up. Consumers care increasingly more about sustainably made vehicles. That factors in more than other industries. You gain a competitive advantage as an automaker by adopting these practices. Alix great analysis, thank you. Now we turn to commodity in chief, focusing on one executive in the commodity world. Today is vicki hollub, ceo of occidental. First, a closer look at her company. Oxy wants to be the best and one of the biggest. The Company Bought anadarko, beefing up its assets in the permian, adding thousands of drilling locations. Its wells are among the top 50. Oxy is hoping to make those wells even better. 70 of its Capital Budget is focused on the region. Here is one way, eor, or enhanced oil recovery. It is typically used for conventional drilling. You insert Carbon Dioxide and water into one well and push the oil and gas out of another well. The iea says 166 projects this year could produce 452,000 more barrels a day. That number could almost quadruple by 2040. Occidental is now experimenting with eor in shale. Historically it is tough to do because the co2 and water cannot move through the tightly packed rock. If oxy can make it work, it can improve the oil recovered from 10 to 17 . The problem, so far, the market is not rewarding it. It has underperformed its peers in price since the equity Market Recovery in 2015. Oxy is trying to look to the future. I recently caught up with the occidental ceo before the anadarko acquisition and asked about the benefit of eor. The way we process co2 through our reservoirs, about we send a pcf through a reservoir, a 40 remains sequestered in the pore spaces in the reservoir. The oil that is trapped and cannot otherwise be moved, the co2 and the molecules expand some molecules sufficiently and reduces its viscosity, so it is moved out of that tiny pore space. What happens is the co2 goes in there and stays there. That is why co2 can be sequestered in oil reservoirs. About 40 of every cycle that we pass through remains sequestered. Over time, we can sequester a lot of volume in the reservoirs in the permian. We cannot only do it in the conventional reservoirs, we can sequester, we believe, ultimately sequester in shale. We have run four pilots, it technically works. Over time, we can develop a Field Development plan that will enable us to sequester in shale as well. Alix lets get more detail on that. Typically it is hard to do with shale because you cant move it, it is tight rock. What will enable eor to work there . In our traditional projects, with conventional reservoirs, normally we use a process where we inject co2 followed by water, and then we repeat that pattern. In the shale play, we cannot use the water because it will not move through the pore space very well, the matrix of the reservoir. The water would only move very well through the fractures and fissures. We have to use co2 from the start. There are two ways that you can do it, inject a certain volume into the well, let it soak. As it soaks, it starts to disperse within the reservoir. It contacts the matrix, gets into the pore, and then we let it so, we let the pressure stabilize and start producing it. Then you get oil out of the matrix that goes into the fissures and fractures and ultimately to the well bore. That process works. The process of doing it like we normally do in a conventional reservoir where you inject co2 in a well and produces out of another well, that is a process that we believe will work as long as we can manage the fact that some will go through the fractures. Alix say that works. What happens to overall emissions . How much can you reduce your co2 emissions . For us, i think we can become Carbon Neutral and then carbon negative over time. We have tremendous volumes, as i mentioned. 2 billion barrels of Oil Equivalent volume in our eor reservoirs. In addition to that, 70 water floods that we have not started to inject co2 into. I think that we will be able to sequester quite a bit. Today we are sequestering about 20 Million Metric Tons, that is with injecting about one bcf a day of the solution. Alix that was my interview with vicki holub of occidental. Time for our kicker, the Trump Administration is trying to break the mold on what foods are available for food benefits. It could save the Smaller Grocery Stores about 500 over five years, and critics say spray cheese is not a real food at all and should not be good enough for