MAGGIE LAKE: Hello, and welcome to the Real Vision Daily Briefing. It's Tuesday, February 1st, 2022. I'm Maggie Lake, here with Tony Greer, editor of the Morning Navigator newsletter. Hi, Tony.

TONY GREER: Maggie, what's happening today?

MAGGIE LAKE: Finally a new month, which I think a lot of people are excited about. We actually have two big stories we're tracking, though. One of them is oil, of course. Oil prices higher. Oil giant Exxon one of the biggest winners of the day after the company reported better than expected earnings on the back of those soaring crude prices. And India has edged closer to embracing digital assets and cryptocurrencies. Our man on the ground in Mumbai, Nipun Kalra, has more on this very important development. Let's have a listen.

NIPUN KALRA: Hey, Maggie. Today is being touted as a watershed moment in India's journey in digital asset landscape, owing to key developments on the policy front. The Indian government has proposed a flat 30% tax applicable to transfer of virtual digital asset. This translates to less ambiguity towards the path forward in terms of regulation. Fears of an outright ban had sprung up during the winter session of parliament, which can now be marked down according to the taxable stature.

Another important element worth a highlight is that the proposal is for virtual digital assets, and not just cryptocurrencies, which expands the cloud to include DeFi and nonfungible tokens. From an investor standpoint, these assets are still not at level playing field, owing to much favorable tax rates in traditional asset classes. Reserve Bank of India, the central bank for our country, will also be launching central bank digital currency. To summarize, it is a positive step forward in this whole journey, and India has embraced the revolution. Back to you, Maggie.

MAGGIE LAKE: So very interesting development. A lot going on there. And of course, this is just happening, so we're going to be following it very closely. And as Nipun mentioned and alluded to, issues and a positive development on the regulatory front, but a lot of tax issues involved. I know people have a lot of questions about that already. So for more information and to follow the latest coming out of India, head over to www.RealVision/crypto, and we'll be all over it in the coming days.

Now, Tony, back over here, oil very much continues to be the story. In fact, I hear an awful lot of people looking at energy as the place to be in this volatile market. Exxon's stock, I don't know where it ended up, but something like 6.5% up for most of the day, 80% if you go back one year from now. What do you make of the action here?

TONY GREER: That's a five sigma move in ExxonMobil that breaks a longstanding monthly trend line. It includes Exxon galloping beyond the 200-month moving average. If you drill down into the numbers, the biggest profit since 2014, with 2.05 versus $1.93 estimates. Their downstream petroleum product sales are up 12% year over year.

Oil and gas production all beat estimates. They announced a $10 billion share repurchase. Last year, they returned $15 billion to shareholders. They're going to achieve their carbon neutral plans ahead of schedule. I mean, this sounds like a fossil fuel bonanza going on in Exxon. And I think we just ignited another leg to the breakout.

MAGGIE LAKE: So just so we know, I know you've been on here, you've been bullish on oil, natural resources for a while, everyone else sort of catching up now. Have you been in or do you liked the equities in the oil majors? We'll get into some of the other commodity markets in a moment, but is that something that you're trading in or that you're recommending for clients?

TONY GREER: Yeah, I've been in oil and gas stocks, an overlap trade from last year. And I see no reason to get shaken out of them. If anything, Maggie, I feel like I just did a fresh reassessment of the oil market at $90 Brent. And I've come up with a bullish assessment here.

So we're going to get to a point where positioning becomes an issue. I don't even think we're there yet because when I weigh the bullish side of the oil factors that I come up with against the bearish side, the bearish side has got a lot of fighting to do. There's a big tsunami of bullish headlines, developments from OPEC struggling to build up spare capacity with which they can manage the price of oil. The IEA is looking for record physical demand, beyond pre-COVID levels.

I think it's really relevant that an Obama judge just literally nixed all the offshore drilling leases that the Biden administration approved last year. So as long as our energy policy revolves around shooting ourselves in the foot on a continual basis, I'm going to say that this oil rally is going to be very much intact, and the dips will continue to be steep in price and very short in duration until we get to a point where everyone's really long. And then we'll have a tumble, and we'll get back on our feet. But there are bullish developments in the crude oil market everywhere I look.

MAGGIE LAKE: Yeah, so I want to ask another question about some of the equities, but let's talk about that crude price for a moment. Everyone now saying $100 a barrel, or we're hearing that tossed around a lot. What are you looking at in terms of price action? And is that the next target you're looking at, or is it something higher than that?

TONY GREER: Man, I'm a big fan of Doomberg, the green chicken, and I was listening to our interview today, our second interview, and it makes me even more bullish from here. It really does. It's one of those things where the price goes higher and you assess the situation, and you say, I mean, $100 is nice. It's 10%, 15% higher than here. But more importantly, the developments from Europe to the US are extremely bullish for gasoline and oil.

So I don't really see $100 as anything but a psychological barrier. Maybe if it gets up to that price with some momentum, you let some out there to take profits in front of a great round number. But more structurally, it seems like we could be in for something even steeper than that. We've got all of these bullish factors. The stars are aligning now, right?

We've got geopolitical risk with the Russia-Ukraine story. We've got the Houthi rebels back droning everything in sight in the United Arab Emirates, likely to take some production offline and at least increase the idea that more of this could happen. The inventories coming into this year for Cushing across oil products are at the bottom end of five-year averages, if not below it. So we're going to continue to crimp demand, cancel leases.

We're going to continue to have a huge number of drilled but uncompleted wells, which are the ones that we could go in and readily tap in the instance that we needed some more oil supply. And all of this is going to take way too long to turn around for the pace that the market is picking up on the upside. So $100 is maybe a nice for sort of microcosm development target or something like that, but it feels to me like we're going to go a lot higher. It really does.

MAGGIE LAKE: Yeah, you bring up a good point. I mean, this is a longer-term situation when you're talking about supply. And there's been underinvestment for a long time. We have OPEC meeting tomorrow. Do you get a sense that we're actually getting the real deal on what's happening with supply? I mean, would they even admit it if they weren't able to meet supply? It seems like a lot of people think that's what's happening.

TONY GREER: No, they wouldn't admit it. I think they would be loath to let it get out. If anything, they probably know that they've got a production shortfall on their hands, and they know that that's probably bullish. So the best thing for them to do at this point is play dumb as much as possible and let this continue.

The headline out of Saudi Arabia today rhymes with the headline that they let out probably two or three times along this rally, and always sort of in the beginning of a new quarter. They are going to raise their March prices for Asian clients. Right? So that's something that we've seen them do the whole time, continuing to ratchet prices higher. This is why, when Biden turns to them and says, hey, we need you guys to let out some more capacity, they say, yeah, I don't think so, and they make up whatever excuse they want, right?

They can source the, hey, we've got a potential continual pandemic to deal with, we've got economic risk all over the place, we've got inflation risk. We're really hesitant to lay off the gas here, you know, figuratively speaking. And so I think that they're managing it brilliantly, I really do. Unfortunately for us, they're managing it brilliantly, because we'll be looking at $5 gasoline at the pump I would imagine by the summertime, if not sooner.

MAGGIE LAKE: Yeah, and you know what that does, an immediate tax hike, in addition to all the other ones we're seeing. Tony, there is a time-- and for those who maybe haven't tracked OPEC all along, the thought was that it's really up to them to determine the price. And they had the supply to put out there. And they would always fine-tune it based on trying to find that sweet spot, right, Tony? If the price was too high, they were worried about killing off demand. Are we in a different situation now in this inflationary environment, where that's not as much of a risk as before?

TONY GREER: We are because we are driving off the ESG cliff as quickly as possible. And the ramifications of that are starting to manifest. Russia just said that they were going to be holding up ammonia exports. And that is definitely a sort of political shot to the bow for anyone that needs to import ammonia or fertilizer, right?

So that's sort of where the oil trade is running into the grain trade, and higher oil prices for longer means higher grain prices for longer. The grain complex has recently woken up and traded right to its highs. Soybeans are breaking out with the story in Brazil. And now we're getting to the food inflation point becoming very, very serious, with an overlap of a potentially European gas crisis getting very serious if they run into a period of this winter that is extremely below average temperatures.

So if they get extended period of cold temperatures there, they've already got a natural gas supply issue, and they've got Vladimir Putin holding the tap like this, deciding how much goes over there. And so that really paints a little bit of a bleak situation when you, if I may reference again the Doomberg conversation that we just had, a lot of people are going to starve if these policies remain in place and the market price action remains in place.

MAGGIE LAKE: Yeah, and I'm glad you brought that up, Tony. I'm going to jump in for one second because we actually have a clip from that interview that I want to play. We have a lot of questions coming in across a lot of the topics we just touched on, but I want to play a little bit of that conversation that you had with him around the supply of natural gas in Europe. Let's have a listen.

DOOMBERG: Tony, let me be very clear-- the 100-day moving average of the price of natural gas in Europe, TTF, is well above $30 per million BTU. $30 per million BTU natural gas for an economy is a catastrophe. It doesn't need to go back to the all-time highs. The fact that it is persistent at seven or eight times what it costs-- and that's for natural gas in the US-- is a total and complete calamity for the European industrial base.

Does Europe want to make anything a decade from now? Does Europe want to be completely self-reliant on imports? What does that mean for the strength of the euro in that scenario? What does that mean for deficits, import/export deficits? This is a total and complete calamity.

At $30 per million BTU natural gas, the European manufacturing sector is effectively acquiring a critical input into its economy at an oil per barrel, dollars per barrel price of oil equivalent of, what, $200 for oil? And in the US, as we're talking, I'm looking at NG1 pricing in at $4 per million BTU. It just doesn't compute. If energy is life, and energy is seven and a half times more expensive in Europe, there's going to have to be a lot less life.

TONY GREER: Yeah. [INAUDIBLE].

[INTERPOSING VOICES]

DOOMBERG: --eventually--

TONY GREER: [INAUDIBLE] shake out.

DOOMBERG: --the circles have to be squared, as we would say. So this is a catastrophe. It doesn't need to go back to the all-time highs. The spike is here. It's real. It's going to be pushed through.

MAGGIE LAKE: Tony, fantastic conversation, and so worrying for anyone who's sitting in Europe and we watch this happen. The spike is here. It's real.

TONY GREER: Oh, it's real, Maggie. I tell you, in addition, what was even better than rewatching myself and Doomberg and getting great bits like that is that I'm listening to the Joe Rogan Jordan Peterson podcast, and I'm listening to them go into an environmental and very much energy conversation, and I'm starting to get excited because Joe Rogan's got 40 million listeners, whereas Doomberg and I have who knows how many listeners.

But more importantly, when someone like Joe Rogan is interviewing Jordan Peterson, who is making quotes like this, I get very excited that the idea that the poor, at least, are in some kind of danger-- listen to this for a minute. That's the old saying, when the aristocracy gets a cold, the working class dies of pneumonia. It's OK, so fine, increase energy costs. Well, what happens? A bunch of poor people fall off the map. Like, a bunch of them.

MAGGIE LAKE: Hm.

TONY GREER: Right? And so the more you increase energy costs, the more that happens. And so if the price we have to pay to move towards sustainable environment is increased energy costs-- and it really isn't, because that's a policy decision. It doesn't have to be that way. That is absolutely 100% an inevitable consequence that what we are doing is sacrificing the poor here.

MAGGIE LAKE: Yeah, and that--

TONY GREER: So it's really a dire situation.

MAGGIE LAKE: --that's spreading through so many conversations now that we have around inflation, around Fed policy. And I don't think it's going to go away anytime soon.

TONY GREER: No. It's important that an audience as big as Joe Rogan is hearing things like that, because it'll start to socialize the idea that this isn't exactly the most-- it may be the most virtuous policy we can think of. It's definitely not the best way to transfer off of carbon.

MAGGIE LAKE: Yeah. Tony, we've got some questions coming in, so let's try to get through a few of them. And I want to start with Christopher's. And he's asking from the exchange, how do you explain the continued backwardation in the oil futures curve? On the one hand, one would imagine higher rates to raise costs of production might flatten the curve. On the other, Cushing inventory is surprisingly low. What do you make of this?

TONY GREER: Yeah, it's all about the Cushing inventory being low. Don't look for interest rates going higher to cause anybody or any industrial to make the decision to not buy gasoline. Gasoline is the power that sustains every industry, and it is very much inelastic in price to the industrial company. It may be elastic in price to the consumer, but I'd argue that, below $5 a gallon or so, we're not really digging that hard into gas demand, fuel demand here.

So I would tend to stay away from looking for interest rates to affect the oil price right now, especially when we're heading into a period of extremely low supply and record demand. That really, for me, is going to be the overlying driver of oil prices. And I think that one of the few things standing in the way of much higher oil prices, given all the policy decision that has been very carefully lined up to cause higher oil prices, I think we're a long way from those gears turning around, let's say. So right now, the gears are in motion to push us to much higher oil prices, even from last sale. I'm really pretty confident about that.

MAGGIE LAKE: Yeah, and Ross on the exchange, I think we talked a little bit about some of the price action that you're looking at, which could easily go above 100, but Ross on the exchange asking this question. If inflation generally remains sticky, will this provide a higher floor in the oil price when it does come off its peak, or is it all about the rate of change of inflation?

TONY GREER: Well, there's a little bit to unpack there. When I look at January's performance-- let me just take a step back, Maggie, to answer this question-- and I notice that the only sector that rallied in January was the energy, oil and gas sector, right, with the XLE up 19%, and I think XOP was up 11%. Every other sector pretty much in the S&P 500 was off in January, led by technology, led by big technology and FAANG stocks, which came off 10% as a group.

That's the sort of rotation that I'm looking for. And I'm looking for it to continue, right? The energy traders have not been bucked off the bull run from any de-risking in the equity market. It's only creating a more bullish, as you can see, a more bullish scenario in the energy equities. And to me, that's the story that is going to drive this year's natural resources trading.

And I feel, I've been saying going into the year, I've said this earlier going into January, and I'll say this going into February, since January just proved it, we are in a position now where the only stocks in the S&P that have got an edge here in the world of rising rates, where the two-year yield leaps 30, 40 basis points a month, the only game in town is energy stocks. And it might be like that all year. We may have 12 consecutive months where tech is negative and energy is positive. Now, I know that might be an outlier and a low probability, but at least I'd get odds, and I'd put a bet down on that happening any day.

MAGGIE LAKE: I laugh because I feel like every time we do questions, we're always going to get a question about Freeport-McMoRan. I don't know why, Tony, I guess I know they know you know it well, but Achileas on the exchange is asking, do you like FXC at these levels? Looks like it's range-bound between 35 and 46.

TONY GREER: Well, I've got to be a disciplined trader. Yeah, I do like Freeport-McMoRan at these levels. I got bucked out of a trade on it recently, so I kind of have to keep my mouth shut a little bit. I bought that last breakout above