Saudis Give European Oil Buyers No Supplies for Next Month

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1:16Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus, global business, finance and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenebeck. Hey, WTI crude, we've seen it slightly higher today, traded above about 103 a barrel at one point. Brent crude has been down for a third day today, at least that was a little while ago. So I think we're still on that trade, but it did go as high as 105 before backing off a little bit.

2:01And I've got to say, our most read story on the Bloomberg today, Tim, has to do with what Saudi Aramco is up to. We're going to get to that, but I just want to add one more point in. Sure, go for it. Gas prices in the U.S.,$4.47 a gallon right now. Remember, we're just a few weeks away from the midterms. Diesel,$6.45 a gallon, a gallon of diesel. It doesn't matter if you don't have a diesel truck. It matters if you buy things that are transported with diesel. You know who's, yeah. I mean, there's Amazon, you talk to them, they'll talk about their green fleet and so on and so forth. But everybody who's really moving things around in a big way are using diesel, right?

2:35And that cost has got to be picked up and paid by someone. All right, so let's get to it. We mentioned Tim laying out the prices and really good perspective. Saudi Aramco, though, telling at least two oil refining customers over in Europe that they will be allocated no crude next month under long term agreements after the kingdom's key pipeline to the Red Sea was attacked. This is according to people informed of that decision specifically. For more, I want to go to Jacksonville, Florida, to Bloomberg Intelligence Senior Energy Analyst Rob Barnett. Rob, good to have you with us. Brent holding steady, as Carol mentioned, amid shifting concerns in Middle East supply.

3:10Saudi Arabia pausing some sales to Europe. Was this Saudi move expected? Well, Saudi Arabia has moved from being an anchor supplier in the global oil market to one that is struggling to connect with its customers. I don't think it's that surprising, given all of the turmoil in the region. But you got to think previously, they've been using this east-west pipeline. That's been a major workaround for the country with the Strait of Hormuz being fully closed or slightly open depending on the day. This pipeline was the key thing that allowed the country to continue to get its supplies to market and the Houthis have really complicated that logistical workaround for the country.

4:03So on paper, Saudi Arabia is capable of producing let's call it 12 million barrels per day of oil. And today it's producing closer to seven, maybe even a little less based on the latest monthly data. So Saudi Arabia is normally producing a lot more oil output. And with it producing so much less, that's the reason that the prices at the pump you were talking about earlier are so high right now. So wait, so what's our takeaway from this, Rob? Is it a short-term blip? Is it something longer that we have to be concerned about and what it means for global oil prices?

4:44Well, everything relates to the conflict. And so in some sense, you've got to put on your thinking cap and think through how the conflict between the U.S. and Iran resolves or if it resolves and what the timeline for that looks like. until we get some kind of more stable geopolitical regime sitting over the region, you know, Saudi Arabia's pipelines, oil fields could be in range of Iranian missiles. And not just Saudi Arabia, it's every country in the region. This is an important part of the world for the oil market. And so I think everything comes down to what's your thesis or theory on how the conflict either resolves or doesn't.

5:35Well, Rob, let's just end by bringing it home here to the U.S. I mentioned some of the AAA averages that we're seeing around the country. Where you live, it certainly varies. $4.47 a gallon here in the U.S. Daily national average,$6.45 a gallon now for diesel. How high does this go? Well, it's really interesting because there is a disconnect between the crude market and the product markets. In a normal time, if you had diesel at over$6 a gallon, that tends to indicate crude closer to maybe 180 a barrel instead of the low 100s we're seeing right now. And what's the disconnect? Well, it relates to refining margin.

6:22Refiners are printing money right now based on product prices. But also there's this just big logistical cost. Our shipping analyst, Kenneth Lowe, has a note out that talks about tanker rates being close to a million dollars a day versus 30 ,000 a day before the conflict kicked off. So basically right now consumers around the world are paying for the shortfall in supply and they're paying for all of these added logistical costs to try and get the products to where they need to be.

6:59Stay with us. More from Bloomberg Business Week Daily coming up after this.

7:07Bloomberg Business Week Daily is brought to you by HPE, bringing you the self-driving network, a network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter. Learn more at hpe.com slash networking. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off.

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8:25Well, Marco Rubio is the first person to act as both the nation's top diplomat and the president's national security advisor. That's since Henry Kissinger during Richard Nixon's presidency. That was about a half a century ago. The advisor title comes with a coveted perk, and that is a corner desk in the West Wing. From there, Rubio can dash to the Oval Office should President Trump summon him. for more on why being able to, quote, dash to the Oval Office and be in the room where it all happens with the president. Let's get to Bloomberg News State Department and foreign policy reporter Eric Martin, who joins us from the Bloomberg Washington, D.C.

8:58Bureau. Eric, great reporting. Love this story. It is the Bloomberg Big Take. Tell us when you guys set out to write this story, what it is, what was your mission, what you wanted to do. Lay it out for us. Sure, Carol. So we're looking to capture Marco Rubio, who is somebody who has been around for what seems like a long time. He was in the Senate for 14 years before joining the cabinet. But to look at how he has evolved and how he has changed in order to serve in the cabinet and to serve President Trump, who's somebody who he clashed with fiercely during the 2016 Republican primaries. Trump called him little Marco and Marco Rubio called him a con man and somebody who wasn't fit to be president.

9:39And so how have they been able to reconcile that? And what we found out in talking to people from the administration and throughout President Trump's tenure and Marco Rubio's life is that it's really been by embracing the policies, the foreign policy of President Trump. Marco Rubio is one of the most popular people when you talk to White House staffers. He's well-liked within the White House. He's well-liked by Republican donors. And so he's somebody who naturally comes up talking about 2028. But in order to position himself there and to be there, he needs to be very attentive to implementing faithfully President Trump's policy.

10:20And he has in his office a screen that is mostly dedicated to, for instance, President Trump's truth social, to always be up on what the president has said thought at the most. Eric, it's like he's a journalist, right? Because we're all glued to it, too. Go ahead, please. That's right. We are absolutely following that from minute to minute. But when you talk to people about what the job of National Security Advisor and the job of Secretary of State, I got to speak with John Kerry. And Secretary Kerry, of course, himself, former presidential nominee and senator, said that the job of the Secretary of State and National security advisors to give your unvarnished opinion, your best advice, your best counsel to the president.

11:05But once the president makes a decision to get behind that, and that's something that Mark Rubio has absolutely done, has gotten behind the president's decisions, even when they're in conflict with positions that he held as a senator, such as as a senator, he was an outspoken supporter of generous foreign assistance, an outspoken critic of an opponent to Vladimir Putin in Russia and Xi Jinping in China, as well as somebody who believed in the value of alliances and really champions the NATO alliance. These are all positions that he's had to in some way set aside in order to diligently implement the policies of President Trump.

11:43Well, I'm wondering about how the policies of President Trump might differ from the policies of Secretary Rubio. We know, given his history in the Senate, what he has espoused in the past, but given the evolution, based on your reporting, based on the folks you talked to, where do they agree, and where is the Secretary merely fulfilling the President's agenda, if he doesn't necessarily agree with it? Well, I got the chance, I got the really unusual chance as far as for print journalists to speak with Secretary Rubio. We had an interview actually last Friday, a phone interview, and he explained to me kind of the way that he sees the job and sees the transition from the Senate to the cabinet and advocating for the president's positions.

12:35But some things that are, I think, have been really highlighted. For instance, when you talk about China, Senator Rubio called China a brutal totalitarian state. He was one of the authors of the bill to punish China for the enslavement and the abuse of the Uyghurs in Xinjiang. He was somebody who really stood up to the Chinese Communist Party. And we were actually, I've gotten to go with him to about 20 countries in the past year and a half. And so we were in Munich and he was on stage having given this Munich Security Conference speech, which got a lot of attention and was seen as delivering the same message as Vice President Vance a year earlier, but with a more diplomatic touch.

13:19And what he said there was the interviewer said, people considered you when you were in the Senate to be a China hawk. And he said, kind of joking, he said, they did too. In other words, the Chinese considered him a hawk as well. And so that's one area where we've seen, you know, a lot of stakeholders on the China file, Treasury Secretary Scott Bessent, USTR Jameson Greer, but where Trump has been really in dealmaker mode mostly in terms of I was on that trip to South Korea and Busan for that first meeting with Xi last October and to have that detente. And what Secretary Rubio told me in our interview is that it would be basically diplomatic malpractice and irresponsible for the U.S.

13:59and China not to have dialogue as the world's two largest economies, kind of the two remaining superpowers, and to not be able to have an open channel, even if there are times where they disagree, to seek that strategic stability that's been the buzzword in Beijing and in Washington for the last year or so. One of the things I'm wondering, and as you report, Rubio has taken a leading part in carrying out some of President Trump's most aggressive actions abroad, central to the planning of the military strike in January that removed Nicolas Maduro from power in Venezuela. There's lots of things that he's been closely involved in.

14:34But he's got a lot of power if you think about the positions, at least certainly on paper. But you think about it, the vice president, J.D. Vance, Steve Whitcoff, Jared Kushner, the son-in-law of President Trump, they can drive major pieces of foreign policy. So how does he see his role when those folks can be very, very involved in things like that? So that's actually – that part of it is not something that we got into in our interview, but the reporting that we've developed over months has been that, for instance, on Venezuela, which is really widely seen from a political standpoint, is widely popular within the MAGA movement and within the Republican base because it was a clean operation, two and a half hours in, grabbing Maduro, getting out.

15:22no American service members lost. And so that's been a hugely popular action, including, as you were speaking earlier with Rob, about the implications long-term for energy security globally and bringing energy security and U.S. energy supply back to the Western Hemisphere, Venezuela, with the world's largest proven reserves. And so, you know, so looking at ways to bring that supply closer to home, to distance a bit from the Middle East and the problems there over so much time. But one thing that we found also in our reporting is that some people around Rubio have had conversations over the course of this year asking private conversations, of course, that are reported on for the first time in our story about when would be a good time to leave the Trump administration because Trump has this history of souring on people around him.

16:14And this was according to people familiar with these conversations. I did ask Secretary Rubio about that. He was very clear with me that those people who we spoke to, he said that those sources are lying. And, you know, obviously there's a lot of attention on or kind of sensitivity around questions for anyone, their place in the administration and how long anybody will stay in the administration or what future plans they may have. But this is something that everybody is – and I think Marco Rubio has been a champion and a prime example of this, of staying on side of President Trump. And the reporting that we have is he's really faithfully and effectively implemented all of those policies and the policy choices and the decisions that President Trump has taken.

17:04Yeah, right, Eric. Let's get to the question that everybody has about 2028, speaking of future plans. And I'm curious about the way that Marco Rubio, Secretary Rubio responds to questions about 2028 and what some Trump president Trump advisors told you about the idea of self coronation within the MAGA world. Sure. So Secretary Rehbaugh, again, he told me that these conversations about people close to him, people around him, considering or getting advice on when he should leave the administration, he says those conversations never happened. But there's a lot of speculation because he is somebody who is well-liked by White House staff, well-liked by major Republican donors, including Ken Griffin made a splash.

17:47Over the summer, he spent$100 million on the 2024 election saying that he would prefer Secretary Rubio to Vice President Vance. but Secretary Reba has been very clear including in my conversation with him he does not want to talk about 2028 that he is completely full at the moment in terms of the amount of work on his plate being the first person in a half century to hold both the jobs of National Security Advisor and Secretary of State and in a time when things move much faster than under Kissinger and so he has really dismissed that 2028 speculation. He's also been on the record publicly saying that he would support Vice President Vance and he thinks that Vice President Vance would make a great candidate and a great president.

18:35So he's really tried to tamp down that speculation. Eric, is this just someone who knows how to play the long game really well? Because it is really fascinating if you think about some of the things that he stood for, certainly before becoming part of the Trump administration. Like you write in the story, how he was assigned by the president in charge of the U.S. Agency for International Development. We know what happened to that agency shutdown. He used to praise that group. So I'm wondering, is there any signs that he's not been happy with what he's had to do or he's all about, despite what you just said potentially, about becoming the next president and just got about 30 seconds here?

19:16Sure. We did not, in our reporting, that I can recall hear from sources saying that he's been unhappy about the things that he has been asked to do. And it's also a situation that, you know, very much very supportive of a unified executive branch and diligently implementing the decisions once the president makes them. I'm all for counsel and advice in private once a decision is taken 100 percent behind the president and full speed ahead.

19:47Stay with us. More from Bloomberg Businessweek Daily coming up after this.

19:55So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. Deep in the work that moves the business. Let's create smarter business. IBM. Did you know every 36 minutes, a child in the U.S. is diagnosed with cancer? Which means some of the bravest warriors you'll ever meet aren't professional athletes or superheroes.

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21:28Well, schools across the nation are curbing their use of tech. In the past few weeks, New York City, it's the nation's largest school district, restricted screen time and banned Gen AI tools for students under 8th grade this academic year. Over in New Jersey, Carol, one school district there is limiting tech device use to two hours. It feels like a good thing, but I know sometimes it gets a little complicated. It does. I want to bring in Randy Weingarten. She's president of the American Federation of Teachers. It's the second largest teachers union. 1.8 million members, including teachers, higher education, faculty and staff, nurses and other health care professionals and more.

22:02She joins us from New York. Randy, good to see you again. I do want to start with AI in schools because your union and Microsoft have reached an agreement on safety and privacy standards on AI in schools. Can you just explain the background here and the talks and negotiations that you were having with Microsoft with Anthropic, with OpenAI, and give us the terms of this Microsoft deal? Yes. So, look, we started this AI Institute about a year ago, actually last July, with Microsoft, with Anthropic, with OpenAI. and because we wanted to actually learn the lessons from social media and from all of ed tech in schools and have the teachers, not the technology companies, in charge of teaching and learning.

22:53I know I'm being overly simplistic, but frankly, Microsoft and others saw that as well because they saw that over the course of the last 20 years, when teachers are not in a driver's seat, there's a lot of misfiring and there's been a lot of misfiring in terms of ed tech. So we started that to help teachers learn, not to help kids learn using AI, but to help teachers. And what we said from the beginning, and Microsoft has been our lead partner in the tech world, was we know that we needed safety guardrails, not just, sorry, not my dog, not just best practices, but safety guardrails in terms of the tech stuff.

23:45And we wanted to make common cause with parents about those kind of guardrails. And so it took a year, and but we got there with Microsoft and hopefully we will get there with OpenAI and with Anthropic because we wanted to assure parents that the that data children's data would never be sold would not be used to test AI would not be used to train and we did a whole lot of other audit functions to assure that that would happen so what is the status of the discussions about the dog no Oh, that's okay. We love dogs here. What is the status of your discussions with OpenAI and with Anthropic? Like, when can we expect a deal from you and them?

24:31You know, I hope shortly. I think that because Microsoft has been our lead partner, it became important to just actually start very much focusing on one of the tech companies. But I think that we're going to see something shortly with OpenAI and with Anthropic. Our conversations with both have been going pretty well. I think that the real issue becomes what happens with Google and what happens with others, because this is part of the reason it has to be an industry standard. It can't just be I mean, I'm very appreciative and it took a long time to get there. But we kept saying to Microsoft, it can't just be about this little AI institute.

25:19We have to actually make this real for parents and for educators and for school systems across the country. And the fact that they have committed to saying that this protocol, this safety protocol, is going to be part and parcel of every one of their contracts with school districts across the country November 1st, that is a really big goal. And that is a really big promise. Congratulations. Congratulations. One of the things I want to ask you, though, Randy, it always, you know, what's the responsibility of companies that they shouldn't even have to do a pact or agreement, but understand the impact of the products that they are creating just out of the gate?