Focusing on the hottest commodities with the smartest voices in the business. First, we kick it off with spot on. It is our take on the big story. Its a tale of saudi aramco and chevron. Joining me is our managing editor of energy and of commodities, and rachel in houston. Lets kick it off with aramco. Testing a 2 trillion valuation on thursday, when will we get to know the real market value of the company . Tina weve had two full days of trading now. They went up to their daily limit of 10 and today they went up about 5 . For a few brief hours, they were trading at the magical 2 trillion level. That is the level that the Saudi Crown Prince was looking for. Where do we go from here . Investors have told us they think it will increase by another 10 to 18 in the next week. On the other hand, we got a note today saying get out, its time to sell. Opinions are all over the place. Alix considering the difficulties the crown prince had bringing this close to 2 trillion valuation, its impressive they got there. Does is do anything to the International Listing . Tina there was a pullback and it became a local effort. You see a lot of local money in this. That defeats the purpose of trying to defray the liability and inject new money into saudi arabia that is not oil related. Again, you having a lot of your own investors in the kingdom put their money into essentially an oil bet. Its not really accomplishing everything the crown prince set out to accomplish in diversifying the economy. That is an effort that is ongoing and they have gone above and beyond to make this listing in riyadh become incredibly successful so theres a chance to potentially look at international. Alix on the flipside, chevron taking a huge writedown primarily due to its natural gas assets. Rachel, can you put this into perspective for us . This huge writedown . Rachel its pretty big. We saw the majors go big on gas. So far, chevron, its been an 11 billion headache. If you have been paying attention to u. S. Gas prices and the Difficulty Building pipelines out of appalachia, you would not be be surprised by how hard chevron has been hit. It will be interesting to see what happens to the independent producers in the area that dont have the Balance Sheet of chevron or diversified assets, because as youve seen, these guys have seen better days. Its a really tough environment for u. S. Gas producers. Alix it has shone a huge spotlight on exxon. It is only taking a 2. 5 billion writedown. Any read on where that stands . Rachel you saw a mix of opinions. On the one hand, exxon tends to take a bigger view, a more forwardlooking view or encompass a bigger future than chevron and they are known for that. Maybe they dont have to take as big of a writedown as chevron. But on the other hand, you have people at mizuho saying what about you . Alix the capex plans were released on the highend. Particularly, permian investments will be 10 higher next year. Along with Permian Oil Production comes natural gas. Its a vicious catch22. Rachel especially in the permian, you are seeing companies say, i have too much gas, i dont know what to do with it. I cant connect to a pipeline. The pipeline that was supposed to be the next up on the docket is delayed because of opposition in central texas. Its not a pretty picture for gas outlook if you have too much of it in the u. S. Alix thank you. As we head to break, goldmans jeff perry weighs in on where he sees gold in 2020. Jeff when we look at the dollarization of Central Banks, the demand from Central Banks globally for gold this year is as big as the nixon era. They are eating of 20 of global supplies. Our estimates, we did 750 tons as a base case of central bank buy. Dedollarization is why i like gold better than bonds. The bonds wont reflect that. Alix im alix steel and this is bloomberg commodities edge. Time for the data dig. Delve deep into the Market Trends of the week. First up, we have the Oil Inventory numbers. You saw a surprise build. Small but a surprise. Most of the decline was in the midwest but that was offset by higher gulf coast stocks of 5 million barrels. I should point out, stocks are the lowest since 2014. Palladium surged to a record this week, topping 1900 per ounce. South African Mining companies halted operations in response to the countrys power cuts. Citi says palladium could go over 2500 over the next six to 12 months. In the ag market, the wheat price got a big bump up in trade optimism. It was the supply and demand picture that was also interesting. The french crop will see the lowest reserves in six years. All of that is on stronger demand. Exports are the highest in seven years. Now, lets get into the ring. Its flaring versus the climate. Shale producers in texas are getting 40 times as many permits for venting natural gas as they did a decade ago. I sat down with the man responsible for those permits, the head of the Texas Railroad commission. Ryan we will continue to grant flaring permits because we continue to see development. However, you will see a big drop in the rate. There is a lot Less Development going on with oil prices being down, less investment in the oil business and a lot of Oil Producers try to operate within cash flow. Because of that we will see less permits. Alix does that mean rigs will get shut down or new investment will not come on . Rigs are coming off the market. If you look at the last year or last six months, the number of rigs operating in the u. S. And texas has dropped by 200 or 15 . Alix if Oil Prices Stay around 60, does it change . Will we have a quick Market Reaction . Two things have to change. One is oil prices have to come up. Over the next couple of years, it would not surprise me to see 70 per barrel again. However, were seeing a lot less capital infused into the oil and gas market. Companies are getting their Balance Sheets changed and as a result, even with higher oil prices, there is not as much capital to invest so less Drilling Operations will go on. Alix have you ever rejected a flaring request . Ryan yes, however, the important part is to understand you wont see that in the data. When we reject them, the producers see there is something wrong with the permit and they withdraw them before we get to the hearing process. If you look at the data, it says none have been formally rejected but a lot have been withdrawn. Alix im confused because the rhetoric six months ago was that the pipelines were going to come on and it would solve everybodys problem in the permian. What did not happen . Ryan were still waiting on one big pipeline. Another 2 billion cubic feet per day of gas capture in place, and another 2 billion cubic foot per day pipeline is coming on the end of next year. That will solve another problem. The recent rhetoric has been around one specific case. This is something i hope we get to talk about, which is this new permit where a producer was connected to a gathering system that caused a lot of confusion and signaled something to the market that was not accurate. Alix lets talk about that. You talked about them hooked up and williams is suing you guys saying youre letting them flare but youre not requiring them to connect to the pipeline and thats a bad thing. What is your response . Ryan were not allowing not forcing them to use the pipeline operator because in the case that came before us, one of two cases, the first one was, you shouldnt allow them to flare. In the case that we heard, the Pipeline Company was asking for rates that were 10 times the market price for gas. They had a big disagreement in terms of what rates they should be paying. Meantime, we were not going to force a producer to pay exorbitant rates. There is another case we havent heard yet that is evaluating the rates they should be paying. All we did was grant a permit for seven months to allow the producer to continue to flare while we work this out. Instead of telling the producer you have to pay these rates or shutdown. That is a very unique case that we almost never see. Alix do you feel you need to consider other things when you wind up declaring a permit . Or when dealing with capacity like climate issues and other stuff . Different requirements . Ryan on macro scale, we do consider those things. People have asked about the amount of co2 being produced. In the state of texas, we are flaring 2 of the gas we produce in the state. Thats a small number compared to 50 years ago the state was flaring 40 of the gas produced. Just in north dakota in 2014 at 2015 they were flaring as much as 20 . Look at places like russia with flaring in the double digits. Texas has a very low percentage of its gas that is flaring and the result is, if we produce more gas in texas, that a lower percentage of the gas that is flared. Alix what do you say to the company that says, im connecting to this pipeline and i pay this rate but you are allowing them to flare . What do you say to that pushback . Ryan when Companies Agree to pay a rate, they do that as the pipeline is being connected. They agreed that the rate before they ever get involved. Its very rare that you have the situation where the Pipeline Company was already connected then they were trying to do a new rate. Its because the company, the producer they had bought the wells from went bankrupt. This is a unique case that almost never happens. Alix that was my interview with the Texas Railroad commissioner. And it is the end of an era. A billionaire announcing he will step down as chief executive of continental resources. It is a shale oil producer he founded over 50 years ago. Beginning january 1, he will become the executive chairman and be replaced as ceo by the former conocophillips executive and continental board member. He once called opec a toothless tiger and said, im not going anywhere, im in oil finder and geologist at heart. I have a long history of buying, not selling our stock, and that will not change. To me, that means he is still going to get his hands dirty and he will still want to drill for oil. Coming up, the business of brewing beans. We are talking coffee. Thats coming up next on commodities edge. Ursula the European Green deal is our new growth strategy. It is a strategy for growth that gives more back than it takes away. And we want to really make things different. We want to be the front runners in Climate Friendly industries, in clean technology, in green financing. But we also have to be sure that no one is left behind. Alix that was ursula von der leyens monumental green moment. The European Commission unveiled their aggressive climate targets that will be Carbon Neutral by 2050 and they raised the reduction target to as much as 55 . The big question is how much money is this going to take . Bloomberg economics might have an answer. According to its analysis, its going to take a 1970s style investment including additional investment of almost 2. 5 of gdp which is about 400 billion euros per year and a 10 increase in Overall Investment over the next 30 years. It will rely heavily on private funding and maybe fiscal rules could be revised to make room for this green investment. Speaking of, its time for the bnef brief, analysis on clean energy, advanced technologies, transport, and commodities. Today we found that Clean Energy Investment stalwarts are seeing investments fall. Joining me is louisa from bloomberg nef. When you take a look at that, what does that tell you about who is leading in the Clean Energy Investment . You are right. Investments have shifted from traditional winners. Overall investment numbers have dropped by a lot and this has a lot to do with the fact that giants like china, india and brazil saw numbers dropped. China is the main country to blame. The country alone saw investments did by 3. 6 billion but we are also seeing exciting news for new markets. This is the case for vietnam, argentina and ukraine, would saw in 2018 record investment levels. Alix we have a chart that shows vietnam and how much the investment has gone up. Is that a fair thing to look at . The costs will be so low. What is driving that kind of investment . Luiza vietnam is a remarkable market to look at. Investment has jumped tenfold from 2017, reaching about 6 billion. This was mainly driven by tariffs on clean Energy Contracts that made, especially the solar market, attractive for developers and investors. Alix who is footing the bill for all of this . Luiza when we look at emerging luiza when we look at emerging markets in general, most of the capital is coming from local sources. This is mainly because of china and brazil, who rely a lot on local players. However, Something Interesting is that last year, we saw Foreign Investment for Clean Energy Projects peeking in emerging markets with 24 billion. If we look at who is putting the money, the top investor, not only in 2018 but also over the past 10 years, theyve invested 7. 6 billion into Energy Projects around emerging markets, most of it in latin american nations such as chile, brazil and mexico. About 2 billion in 2018 alone. Among the top five for 2018, we also have actis. Alix thank you so much, i appreciate that. Lets turn to commodity in chief. We focus on one executive in the commodity world. First, a closer look at some of the challenges in the coffee industry longterm. Coffee farmers need more buzz. Prices are up 40 since midoctober on deficit concerns. But the industry still suffers from things like overproduction and volatility. Industry consolidation putting a lot of control in the hands of two big suppliers, brazil and vietnam, and climate change, which can alter how a crop survives, grows, and tastes. Low prices create decadelong boom and bust cycles that are hard to navigate. Take brazil, it is the largest grower and shipper of arabica beans, like the ones starbucks uses. The crop missed expectations this year. Brazil incentivize farmers to hold beans rather than sell them. The result is a price spike for some buyers. Enter illy cafe. This roaster wants to decommoditize the industry. Longterm supply contracts so growers have cash to innovate, improve genetics and renovate plantations. Illy cafe is also one of many roasters that signed a declaration with the International Coffee organization, which is exploring a funding vehicle using public and private money to stabilize pricing and production. The market needs a reliable, longlasting jolt of caffeine. Alix i recently caught up with andrea illy and asked how much investment is needed. It needs to be 1 billion per year in order to create resilience. The problem is how to allow growers the success to finance. Alix what do you do . The cost of the producing countries is twice as high as that in the consuming countries. Plus, they have harvests and access to credit. The solution is to mobilize institutional funds as well as the philanthropic funds and Impact Investment by simply providing collaterals to the growerss investment. A thing as simple as a longterm supply contracts can represent sufficient collateral in order to allow the grower to access the finance. Alix what are roasters going to do . What is the ico layout and what is your role in it . Andrea first of all, i think one of the most important strategies is to direct source coffee from growers. Traders can facilitate because traders can sell contracts providing full traceability where the coffee comes from and intermediate a contract between the roaster and the grower. This is one way to have a price fixed on a longterm and having a price which can take account the cost of production and not only the spot prices on the stock exchange. This is one tactic. As i said, the longterm contract can also represent the collateral for finance. Other things can be that we build a fund, we are now going to investigate the ability for a fund for coffee sustainability. Alix do you need coffee demand to grow at 2 to make this worth your while . If it drops below that, does that affect how you allocate . Andrea rather than considering the volume increase it would be important to consider the value increase. It would be really necessary in the market in the future to avoid, to fall once again in the low price trap. This 10 year cycle is really detrimental to the industry and it is stupid because of overproduction. If you can better control production and maintain a stable supply and demand. Alix what price do you think is the best . Andrea minimum 1. 50 per pound. A price that is really allowing to cover all cost of production. Alix what is the top . The price you can sustain . Andrea 1. 50 2. 00 per pound. That is really allowing to cover all cost of production. To have a decent cash flow for growers so they can improve the plantation and deliver a quality that is good for the consumer to pay a premium. Alix that was my interview with andrea illy. Oh tannenbaum, how expensive are thy branches . This year, your Christmas Tree is going to be more expensive because of a drop in production. Growers are struggling to remain profitable as a droughts and other weather disasters increase. That is all bad news for your wallet. Christmas prices have increased since 2008. The average price of a tree is 76 according to industry reports. That does it for commodities edge, this is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone wifi up there . Uhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your local xfinity store today. Caroline the challenges of 2020, what are you prioritizing . What is front of mind for you . Sheryl well, definitely the biggest one is the election. We think the 2020 election is a massive test for us, and it should be. You know, elections have changed. We have changed as a company. If you look back to 2016, of course we were prepared for state actors. But what they really did was hack in and take information. This new, more insidious stuff, we were totally unprepared. We never thought of it. We missed it. Everyone missed it. That is different now