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U.S. oil exports could derail the global oil rally, says energy expert

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The U.S. is exporting crude oil at a record pace with no signs of slowing down. That has the potential to unbalance a global oil market in recovery, says energy expert Tom Kloza.

“The exports are what we need to focus on through the next 30 days,” Kloza, co-founder of the Oil Price Information Service, told CNBC’s “Futures Now” last week. High U.S. production could decide how oil prices trade in the second half of this year and through 2019, he added.

Domestic exports have not dipped below 1 million barrels a day since late November, as U.S. oil producers fill the void left by reduced capacity from Mexico and Venezuela. Higher demand for petroleum and gasoline in South America has also boosted appetite for North American oil.

U.S. crude oil exports rose to 2.175 million barrels per day, or more than 15 million a week, at the end of March. That marked its highest level on record.

“We think that number is going to go up to probably 20 million or more [a week], get to maybe 2.5 million barrels a day,” said Kloza. “The United States is in essence going to be exporting more than the United Arab Emirates, Kuwait, Nigeria, those individual countries.”

Rising U.S. production and exports comes at a time when other oil producers are ramping up their own activity, said Kloza.

Russia recently had “the highest output in about 11 months and there’s some hints that maybe they’re not going to be in this long-term supply cutting agreement with the Saudis,” said Kloza. On top of that, “we’re going to see higher production from Kazakhstan, from Brazil, from the United States, and from Canada.”

Global oil production may put a dent in the progress made the Organization of Petroleum Exporting Countries in correcting a supply-demand imbalance. In 2016, OPEC and some non-OPEC members had agreed to limit production to re balance oil markets after their late-2014 plunge.

Political events and international relations bring drastic moves to the market come summer. Among them, Kloza sees the Iraqi and Venezuelan elections in May and “superhawks” John Bolton and Mike Pompeo coming into the White House as possible market movers.

Crude oil is “the ultimate macroeconomic product,” Kloza said, saying that major banks like Morgan Stanley and Goldman Sachs estimate oil could top $70, a level Kloza said is “priced for pure perfection.” Still, a number of headwinds are developing to keep crude’s gains curtailed.

West Texas Intermediate and Brent crude were both more than 1 percent lower on Friday, as trade tensions between U.S. and China escalated. On Thursday evening, President Donald Trump announced he would consider levying an additional $100 billion in tariffs against China in response to possible tariffs on U.S.-made products such as soybeans.

“Trade wars, a recession, any notion of any weakness in global economies are going to cut into,” oil prices, Kloza said. “So keep that in mind. We might yet be priced for perfection but perfection is a pretty difficult thing to see.”

Kloza forecasts an average of $67 a barrel for Brent crude oil this year. It currently trades at that level.

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Biden tells Netanyahu U.S. supports ceasefire as Israel, Hamas tensions escalate

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US President Joe Biden delivers remarks on the COVID-19 response and the vaccination in the East Room at the White House in Washington, DC on May 17, 2021.

Nicholas Kamm | AFP | Getty Images

WASHINGTON – President Joe Biden in a Monday afternoon call with Israeli Prime Minister Benjamin Netanyahu expressed his support for a ceasefire as fighting between Israel and Hamas enters a second week.

“The President reiterated his firm support for Israel’s right to defend itself against indiscriminate rocket attacks. The President welcomed efforts to address intercommunal violence and to bring calm to Jerusalem, ” according to a White House readout of the call.

Biden also called on Israel to ensure the protection of innocent civilians amid the conflict.

“The two leaders discussed progress in Israel’s military operations against Hamas and other terrorist groups in Gaza,” the statement added. Biden also discussed engaging with other partners and allies in the region in order to help de-escalate tensions.

Violence intensified over the weekend, with Israel conducting an airstrike Sunday that leveled several homes in the Gaza Strip. The strike, the deadliest yet in the ongoing conflict, killed at least 42 people. Meanwhile, more than 3,000 rockets bombarded Israeli cities.

On Sunday, Netanyahu defended the punishing airstrike on Saturday that collapsed a 12-story building housing international media, citing intelligence that Hamas was using a portion of the building to plan terror attacks.

A member of the Palestinian civil defence walks amidst the rubble of a building in Gaza city which housed the Intaj Bank linked to the Hamas movement which controls the Gaza Strip, on May 15, 2021.

Mahmud Hams | AFP | Getty Images

Netanyahu said that the building’s occupants, which included the Associated Press, broadcaster Al-Jazeera and other media agencies, were given an hour’s notice to evacuate before the strike.

“Here’s the intelligence we had,” Netanyahu told CBS Sunday program “Face the Nation.”

″[It’s] an intelligence office for the Palestinian terrorist organization housed in that building that plots and organizes the terror attacks against Israeli civilians. So, it’s a perfectly legitimate target,” he explained.

This is breaking news. Please check back for updates.

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WarnerMedia-Discovery deal pressures ViacomCBS and NBCUniversal

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Shari Redstone, chairwoman of ViacomCBS and president of National Amusements, reacts as she celebrates her company’s merger at the Nasdaq Market site in New York, December 5, 2019.

Brendan McDermid | Reuters

In the words of the great Tom Lehrer, “Who’s Next?

Now that AT&T has decided to separate WarnerMedia and merge with Discovery, the rest of the media world — particularly the smaller players — face new pressure to make their countermoves.

Even before this deal, it was clear that Lionsgate, MGM, Sony Pictures and AMC Networks were probably too small to compete in a streaming world where success depends on a massive store of content and global reach.

But ViacomCBS and Comcast‘s NBCUniversal are much bigger, and probably assumed they had some time — at least a year — to see how many subscribers signed up for their streaming offerings, Paramount+ and Peacock.

“Within the next two years, it’s going to be put up or shut up for all of us,” said David Zaslav, Discovery’s CEO who will take the top job at the combined company, in December. “Can you show you’re scaling? Are you going to be a player in the U.S.? Are you going to be a player around the world?”

Under pressure

That timeline is shorter now.

Suddenly, both ViacomCBS and NBCUniversal seem subscale as they attempt to put together global streaming services. They aren’t trying to be niche players, such as Starz or AMC+.

That means both will need more content to compete against Netflix, Amazon Prime Video, Disney and whatever the new name of WarnerMediaDiscovery will be.

The obvious move would be for ViacomCBS and NBCUniversal to merge. But a combined ViacomCBS/NBCUniversal would have two U.S. broadcast networks — CBS and NBC — housed under the same corporate roof. That won’t fly with U.S. regulators. While the parent companies could theoretically spin out or sell them, the broadcast networks provide so much value to both companies — and their streaming services — that it seems unlikely.

Further, Shari Redstone controls ViacomCBS and Brian Roberts controls NBCUniversal through his family’s Comcast shares. Their dual class share structure is another obstacle for both companies, as it makes it hard for outsiders to pressure the companies to make changes the executives don’t favor. But it’s not a deal stopper — Discovery had several classes of shares too, but John Malone was willing to eliminate his voting shares to get a deal done with WarnerMedia.

Four options

That leaves Comcast and ViacomCBS with four likely options.

Buy. If both companies feel their streaming services can compete around the world, they can go on global and domestic acquisition sprees. It may take several deals to get to a scaled position, as they piece together smaller U.S.-based assets and larger global media companies in Latin America and Europe.

Sell. They could also sell. Shari Redstone is more open to the idea of selling ViacomCBS than her father, according to people familiar with the matter. It’s unclear if Roberts would consider selling NBCUniversal. Potential buyers could include Amazon or the newly merged WarnerMedia-Discovery. Apple and Netflix continue to hover along the periphery, but neither company has ever shown much interest in making big media acquisitions.

Reduce their ambitions. The third option is to throw in the towel on being a global streaming service. Instead, NBCUniversal and ViacomCBS could license their content to other, larger streamers and wind down Paramount+ and Peacock if they fail to gain global traction.

Bundle. Option four is similar but less drastic. ViacomCBS and NBCUniversal could begin bundling their streaming services together or finding new streaming partners to increase global distribution through discounted offerings. The main problem with this strategy is it limits the upside for both companies, who won’t be able to compete with larger players for top content and breadth of programming.

The fifth option — inaction — is no longer a viable strategy. The pressure is on Roberts, NBCUniversal CEO Jeff Shell, Redstone and ViacomCBS CEO Bob Bakish to find exciting go-forward solutions for their companies.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

WATCH: What the WarnerMedia-Discovery deal could mean for the streaming wars

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Bob Baffert, trainer of Kentucky Derby winner Medina Spirit, suspended from entering Belmont Stakes

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Bob Baffert the trainer of Medina Spirit talks to the media during the training for the Kentucky Derby at Churchill Downs on April 29, 2021 in Louisville, Kentucky.

Andy Lyons | Getty Images

Horse trainer Bob Baffert was temporarily suspended Monday by New York racing officials from entering horses — including Kentucky Derby winner Medina Spirit — in the upcoming Belmont Stakes or races at other major state tracks as a result of Medina Spirit’s positive test for a banned drug after its Derby victory.

The suspension applies to any Baffert-trained horses at Belmont Park, Saratoga Race Course and Aqueduct Racetrack, the three major thoroughbred racing venues in New York.

The New York Racing Association said that its decision to bar Baffert’s horses, for now, took into account not only the probe into Medina Spirit’s Derby win, but also “the fact that other horses trained by Mr. Baffert have failed drug tests in the recent past, resulting in the assessment of penalties against him by thoroughbred racing regulators in Kentucky, California, and Arkansas.”

John Velazquez guides Medina Spirit to win the 147th running of the Kentucky Derby at Churchill Downs.

Jamie Rhodes | USA TODAY Sports | Reuters

New York Racing Association CEO Dave O’Rourke said, “In order to maintain a successful thoroughbred racing industry in New York, NYRA must protect the integrity of the sport for our fans, the betting public and racing participants.”

“That responsibility demands the action taken today in the best interests of thoroughbred racing,” O’Rourke said.

Medina Spirit on Saturday finished third in the Preakness Stakes behind the winner Rombauer, and Midnight Bourbon, which finished second.

If a second test sample confirms that positive result, Medina Spirit will be stripped of the Derby win.

This is breaking news. Please check back for updates.

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