Oil Dives as Trump Backs Off Iran Threats

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1:52Scarlet Fu:on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's check in with Mike McGlough, and he's our commodity strategist down there in Miami Beach. Hey, Mike, we're seeing, I guess, predictable, and we get a little ease in the tensions in the Middle East, and we see oil pull back here. How much should, to the extent, or let's assume that President Trump does want to find an off-ramp here and cease operations in Iran. And where do you expect oil to go and over what time frame? By the time we get to the midterms, Paul, I think that front crude oil contract will be closer to 50 than 100.

2:31Right now, it's$73 a barrel. That's the December contract. So in futures and combined, it's like to say we're going where the pucks, skating where the pucks go. Well, that's where it's going. The high was 78. So the front contract was unable to get above 100. And now it's taking down. But we have good reasons. So I think that high we put in this year around 120 is going to last for years. Very similar to 130 in 2022 and 147 in 2008. And the key question is now we have the bottom line is we have the leader of the world's most significant energy producer, net exporter of crude oil and natural gas who wants prices lower and there's election in November.

3:09So to me, that's where it's going.

3:10Scarlet Fu:So you see it all lining up. How long does it take before we see prices at the pump? how diesel prices, propane prices start to fall in tandem. Scarlett, I'm glad you went there. So we got to$4.396 or so in the average gallon of gasoline in this country. I think that's the peak, right around$4. Diesel, right around$5.30. I think that's probably the peak. How much lower they go, good example. We've never gone this high in gasoline. Typically, it drops around$2 a gallon. I think that's going to happen. There's one key theme. There is a key point this morning, our morning meeting, Chris Kane, our equity strategist pointed.

3:48One thing that's happening, that's the 500 drop below its 200-day moving average, but volatility is still too low. So what I think is once we have volatility coming from the energy market and the gold market, tricking over the stock market, that's part of your pressure to make all these prices go lower and potentially have crude oil go back to the level I've been looking for forever, which is$40 a barrel. That's been the bottom for three times since 2008. So, Mike, there are reports that there has been, as a result of the war and attacks by Israel-Iran, some damage to some of the infrastructure in the Gulf region here.

4:26Does that argue for maybe a little bit higher than the normal levels, given there might be a supply constraint for a number of years? Paul, that's part of that global recession that's really helping, hurting the rest of the world. The U.S. is a net exporter of crude oil, natural gas, corn, soybeans, and wheat. And the key theme there is probably natural gas for the rest of the world, most notably Europe. That's a problem. A lot of that Qatar natural gas cut out might take years to bring that back on. But in the U.S., that means a glowing glut will have to export. So that's why it's really significant.

4:57But this, to me, is part of that trigger for that global recession that we already were heading to potentially. Partly because they're all fighting tariffs. So now it's about as long as the U.S. can repress the ability for Iran to have an offensive capabilities to close the straight, which we're kind of getting there. Gold's already figured that out. Then this is probably a peak we're going to see for years in crude oil this year.

5:18Scarlet Fu:I'm glad you bring up gold. I wanted to go there next because we've seen gold pair its losses. It's now down only two point one percent, but it's still a long way off from the peaks that it made at the start of this year when it hit a closing high. 53-54. Has that bull run ended? I mean, is that the top here? We know what I blame. I think that bull runs over, Scarlett. It's very similarly in things to 1980 and the peak in 2011 as far as a high velocity. Gold was the most expensive ever versus Bloomberg commodity index at the end of February and the highest in almost 50 years versus 60 month moving average.

5:52So it was a tremendous front runner indicator for what's happened. It bought the rumor. Now it's selling the fact. And Now it's just way too expensive. Same in silver. And typically when you put in highs like this, you do at this kind of velocity, they last for years. So I think it's going to languish. Thank you very much. This has been a great bull market. And it's done.

6:11Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this.

6:18Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Here's the big take story. I like it. Tim Cook doesn't want to talk about retirement yet, but John Ternus is emerging as his most likely successor. Who's to blame for that? That's Mark Gurman. He's a managing editor for Global Consumer Tech. He's in Los Angeles. And that's the big take story here. You know, when you talk about Apple, you don't really talk about succession for Mr.

6:53or Kim Cook, but he is 65. And I guess you have to think about it.

6:57Scarlet Fu:Yeah. And I mean, he's a consummate planner. So you know that something's in the works there. Yep. And I think a lot of investors kind of looked at the Disney situation and said, boy, I hope we can do a better job in succession than they did at Disney. So we'll see how this plays out. But Mark Gurman, he is the man on the Apple story. Mark, thanks so much for joining us here. I was just mentioning to Scarlett, we don't really talk about succession at Apple too often, but maybe we should. What's your story today? You know, I think actually, I know you were just talking about Disney. I think the Disney situation has actually made it a bigger level of importance within Apple's executive team and within the board there.

7:35They don't want a repeat of what happened. Clearly, they picked the wrong guy a few years ago, and it seems like they got it right this time with Josh DeMauro and Dana Walden. And I think Apple wants to get it right on its first try for succeeding Tim Cook. Now, remember, this is an interesting succession because this is going to be the first planned CEO transition in Apple's modern history, certainly post-1997 brink of bankruptcy Apple. Remember, Steve Jobs stepped down prematurely due to health reasons, unfortunately, before passing away. And Tim Cook was the COO at the time, so Jobs appointed him as CEO.

8:15and you know Cook has done a remarkable job over the last 15 years but this is really going to be the beginning of a new era a real transition for the company. John Ternus the senior VP of hardware engineering is at the center of the action he's about 15 years younger than Cook 10 to 15 years younger than the rest of the other options on Apple's executive team he's in charge of devices engineering, so 80 % of the revenue the company brings in. A brilliant mastermind engineer, someone who's deeply ingrained in the Apple culture. And I think as young as he is, this would be a continuity pick for Apple.

8:55Scarlet Fu:A continuity pick. Is he someone that investors are familiar with? Have they gotten enough exposure to him? Do they know what he's like and feel that they can trust that he can steer this company into the next century? Or maybe not that far off. Yeah, well, if they read my article today, they'll learn a lot about him and perhaps become comfortable with the idea of a John Ternus as CEO. They've been pushing him to the forefront in events. The MacBook Neo that was introduced in early March, March 4th, it was Ternus who did the introduction of that. And it was Ternus who went on Good Morning America to talk about the launch of the MacBook Neo as well.

9:37Obviously, those are things that you would typically see Tim Cook do himself, but obviously that torch was passed to Ternus for major product introductions.

9:47Scarlet Fu:So in terms of John Ternus, what is his special distinction? I mean, Steve Jobs was, you know, the head designer in many ways. He kind of was the innovation guru for Apple, could see around corners in terms of figuring out what people needed before they did. And Tim Cook was a supply chain genius. That was his forte. What does John Ternas bring to the table that is really his distinction? He's an engineering expert, right? He knows how to build these products. He's the one who takes these products from concept to manufacturing, right? So this is someone who is really in charge of the products.

10:25And if Apple is going to remain a hardware-centric company, a product-centric company, he's the person to take them into the next 15, 20 years. If this is going to turn into an AI company, a software company, services company, he's certainly not the right pick. So it really comes down to what Apple's board sees as the future of the company. And I would bet that they continue to see hardware as the very center of the action there. Hey, Mark, when I think of Tim Cook, I think he's almost as much as a statesman as he is a corporate CEO, a statesman in terms of dealing with maybe the U.S. administration, as well as international partners, most notably China.

11:03What do we know about Mr. Ternus in that regard? We don't know much. He does lots of meetings with regulators and some government officials around the world. But I mean, I guess you're asking about Trump. That relationship is managed by one person and one person only, and that's Tim Cook. There's some government affairs folks involved with the Trump relationship, but this is really a president to CEO relationship. And don't forget, you know, Donald Trump is going to be president of the United States until early 2029. So we've got several years left of that, three years left of that administration.

11:38And even if Tim Cook is no longer CEO while Trump is in office, Cook is still going to be managing that relationship. Now, I don't anticipate that Cook will be out before Trump per se, but I do believe Cook will be part of Apple, I would say, for the next 10 to 12 years, even if that doesn't mean he's CEO. I fully expect him to remain part of Apple as executive chairman or some sort of president role, even post-CEO tenure, where he would be operating in that sort of government official capacity.

12:12Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. or watch us live on YouTube. Paul Sweeney and Scarlet Fu here on Bloomberg Intelligence with you in New York City. And Paul, can you believe it's been just over a month since the Supreme Court basically said, you know what, we're not going to go forward with those tariffs. I mean, there's so much that's happened in March.

12:48Scarlet Fu:It's kind of hard to believe that it's been about a month. But since then, we know a lot of retailers, we know a lot of companies have been applying for refunds. They are seeking refunds for those tariffs that they paid since the tariffs were imposed. Steve Lamar is president and CEO of the American Apparel and Footwear Association. Of course, many of his members have a lot of money at stake here. Steve, just give us a state of the, you know, state of the world here when it comes to your members and how they are trying to secure refunds from the government. Well, yeah. And first off, thank you for having me on.

13:22We were very appreciative of the Supreme Court taking this decision. It was the right decision. It really confirms that Congress is responsible for tariff policy, Article 1, Section 8. You can look it up if you don't believe me. And we're really pleased to see the Supreme Court made that decision. Our attitude is that refunds should be returned the same way they were collected, automatically, fully, quickly, to the importer record. You know, the individual that paid the tariffs, they should be the ones that get the money back. They can then decide what they end up doing with it if it gets passed on to the consumer if it gets passed to the workforce If it's used for investment a lot of our manufacturers They've had to put investment on hold for the last year because they haven't had the money to be able to make those investments And now and probably one of the biggest pro manufacturing things that have happened All these manufacturers in our industry and in other places are going to be able to see that money again So they can be able to drive those investments going forward I think, Steve, a lot of people are very skeptical that this process of returning the tariffs can even work, will work.

14:31What do you guys think? We think it will work. We think it has to work. You know, Congress, well, you know, whenever the U.S. government takes money that they're not allowed to take, I mean, it's a well-established principle. It's a very immutable law, probably more so than gravity. You know, they have to return the money, and they have to return the money with interest. In fact, probably half a billion dollars of interest gets incurred by the U.S. government every month there is a delay. So there's a powerful incentive not only to repay the money that they've already taken incorrectly, but to do it quickly so they don't keep running up the bill at the taxpayer expense.

15:09Scarlet Fu:Do we have any evidence that the process has started, that some of your manufacturers are going to get a refund in a week, two weeks, five weeks? I wish I could tell you those specific numbers. I'll give you two data points. One is the U.S. government refunds customs tariffs every single day. They've been doing it for years and years and years. It is part of the natural rhythm. Companies import, they overpay their tariffs, they get the tariffs back. And you can look this up. The Treasury Department reports this on a daily basis. Reality actually is the amount of tariffs that we're talking about and the amount of refund entities that we're talking about is much less than what the U.S.

15:52government does every year when they refund taxes to individual tax filers. About 117 million tax filers in 2024, 331 ,000 importers record. So you can tell the numbers are just a fraction when we look at the tariff refunds and the other thing is that the Court of International Trade which is the court that has jurisdiction over these issues directed by the Supreme Court is in a very far along in a process with Customs and Border Protection to oversee the development of a system to ensure the orderly repayment of the refunds again with interest to the importers record so that process is well well and well advanced president trump the administration remains very hawkish as it remained it relates to tariffs talking about section 122 section 301 blah blah blah how is that going to play out well the president is a big fan of tariffs as you as you pointed out and he is really looking at trying to recreate the system that was struck down by the supreme court They've turned on one never used before provision of trade law, the Section 122.

17:08A lot of confusion, a lot of conflict about whether that's an appropriate step to take. Section 301, which is a more established provision of trade law, is being used here in this situation as well. And there's a case there where maybe it's being used in a way that it's not normally being used. I mean, normally Section 301 is an investigation in search of answers. But right now we sort of have an answer kind of in search of an investigation because they're literally trying to recreate the system that they had in place before.

17:40Scarlet Fu:Steve, we also have to ask you about the war in Iran and what that means for your members. Certainly, rising oil prices trickles through right away. And that has increased their costs at a time when there are already concerns about whether the economy was slowing down even before the war began. Yeah, so we're obviously it's a it's a it's a terrible situation. We hope they'll be able to resolve this as quickly as possible to, you know, war is always as always really difficult. But, you know, when you look at it from the lens of oil, oil is oil is more than just fuel. I mean, it shows up in fabric and fertilizer in, you know, so many different ways in freight.

18:21and ultimately that can then become part of the final price tag that U.S. consumers pay. And again, that's not just in our industry. We would see that really across the board. So I think really looking beyond just our industry, which is very globally focused, you have really a lot of our economy is praying for, looking for a quick resolution. So not only do we see the adverse impacts on oil, but also the adverse impacts on the logistics that had been created as a result of this. And keep in mind, we still have the problem with the Red Sea, which hasn't fully returned to normal. There's some tentative steps there, but that's far from where it should be.

19:02Steve, about 30 seconds left. With some hindsight now, do we know who paid tariffs? Who is paying tariffs? Well, with hindsight and foresight, tariffs are paid by the importer of record. In some cases, that gets passed along. In some cases, that gets totally eaten by the manufacturer, the importer, whoever actually paid the tariffs. Really, it is a case-by-case thing where you have to, each individual company, and in fact, in many of the different product lines, will have very, very different answers. So we don't, like, I guess a lot of folks are saying, hey, it certainly wasn't the exporter, probably.

19:38Probably. So it's some combination of consumer, the corporate food chains. That's kind of where it's all kind of dealt with. Exactly right. Some tariffs are a cost that's imposed on the supply chain and different companies will absorb or pass that cost along. And that will change over time. You know, ultimately, ultimately, ultimately, over many years, tariffs are costs that, like every other cost, ultimately get passed along to consumers, sometimes in the form of higher prices. but they make their way really throughout the entire supply chain a lot of different ways.

20:35You