25/05/2017 BBC Business Live


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This is Business Live from BBC News with Sally Bundock and Ben Thompson.


Can Opec fire up the price of oil without fuelling


Live from London, that's our top story on Thursday 25th May.


The price of Brent Crude is already on the rise as the Opec cartel


recommends a nine month extension to production cuts.


President Trump comes under pressure from European leaders to stick


with the Paris agreement on climate change.


He is meeting with them today and we will tell you all you need to know.


Markets are trading higher, taking their lead from Asia.


And I sit down with the man who makes Hollywood Blockbusters


Jason Blum tells me why making movies on the cheap gives him more


And as the boss of J Crew says he underestimated how technology


We want to know how has it tech changed the way you shop?


Do get in touch about your online retail shopping experiences. What


did you buy in the midnight hour after a big night out? That will be


interesting! We start with the price of oil


and whether that goes up or down will be decided later at a meeting


of the world's top producers. Opec - the Organisation


of the Petroleum Exporting Countries is led by Saudi Arabia,


with other major producers including They're being joined by non-Opec


members inclduing Russia and are expected to announce a deal


later to try and push prices higher. In December Opec and non-Opec


countries agreed to cut production by 1.8 million barrels


per day, about 2% Those cuts were agreed for six


months, but that expires in June. After yesterday's meeting to monitor


progress on that a nine month The price of Brent rose sharply


in December when those That was the trigger point in


December last year. But it's been volatile


since then and struggling Russia can cope with this level -


Moscow has based its budget But the biggest Opec producer


Saudi Arabia wants $60 per barrel. Shale oil production


in the US fell sharply when prices hit rock bottom -


it just wasn't worth their while to But now prices are higher they're


back - and their technology is improving making it cheaper


and more efficient. And it means US oil production has


surged by a million barrels a day over the past year


and all that is adding With me is Alan Gelder, an expert


at oil analysts, Wood Mackenzie. Welcome to the programme. A lot to


get through, Saleh laying out some of the issues and that is what Opec


the break even point, what price do the break even point, what price do


certain countries needed to be. That will be a key point of the


negotiations. Saudi Arabia has declared 60 and other countries need


a higher number to achieve a fiscal balance. If not, they need to borrow


Opec need a higher number, Opec need a higher number,


Venezuelan would be the highest. How hopeful of a that they will get the


higher price? If they sustain production cuts over the next nine


months, we might get to level the Saudis are expecting towards the end


of the year, but something that is high 50s by the end of the year. We


should say non-Opec members, Russia involved in this. They are concerned


about the United States. We talked about shale production coming


online. A real contender because it is the traditional producers we


associate this with. When the price fell saw a lot of the production


falling away, but this is coming back? This is Opec's dilemma, there


is a new player in town. They can do it in a commercial way, so the


challenge for Opec is, with these cuts, when do they online the cuts?


What is the pacing of that, how does the manual group work? We're looking


at the extension to nine months because the first quarter is when


demand dips and that is not when you want to return barrels to the


market. We saw parallels as far as the price is concerned in trying to


push shale producers out of business, so there is a threshold,


there is no point in getting this oil out of the ground in terms of


shale because it is expensive. We have seen technology improve that


makes it cheaper to get shale out of the ground, so that argument doesn't


work any more? It is a balance. We have seen a number of companies


fail, but we have seen consolidation, costs come down and


technology improvement has meant it has gone from break evens of 60 to


50. The question we have, what the balance between technology


improvements and cost inflation as a result of activity which requires


higher prices. There has been a big development in West Texas, that is


where most of the growth is coming from. Other places near higher


prices. Opec is facing a different dynamic now than its traditional


market. It is so different how things have changed. Thank you for


explaining that. The White House has denied


accusations that the President's budget proposals contain


a serious maths error. Former US Treasury Secretary Larry


Summers says the spending plan $2 trillion of extra federal revenue


twice - by using it to both to cut But White House's budget director


says he stands by the numbers. The budget unveiled


on Tuesday proposed deep cuts Aston Martin has posted a


first-quarter profit for the first time in a decade. Revenues in the


first three months of the year more than doubled after strong sales of


its new model. It was sold by Ford in 2007 to its investment firms. The


company has gone bankrupt seven times in its history and is now


reported to consider a stock market flotation in London next year.


Mongolia has received a $5.5 billion aid package


to stabilise its economy and push through much-needed reforms.


In return, Mongolia agreed to cut spending and raise taxes


as well as build a stronger network for its financial services.


The resource-rich nation which holds presidential elections next month


suffered a slowdown after commodity prices collapsed, and demand slowed.


Not often we talk about Mongolia and not often we talk about the next


story either. A Chinese group is buying


the world's second Humanwell Healthcare Group will pay


the Australian health care giant Ansell $600 million


for the business. It is a big deal? It is. It is a


condom brand named after James bond. They are selling their business to


the Chinese consortium. You have Humanwell health care group,


partners and among the brands its selling sounds like James Bond.


China's condom market is lucrative, set to triple by $5 million and that


is according to a report out. There is a lot more awareness of the


benefits of condom is. Sales in China have jumped in two double


digits in a year. And also the manufacture of wide range of drugs


to contraceptive drugs to HIV test kits. There are many Chinese


manufacturers seeking to buy foreign firms to try to expand beyond their


home market and no big surprise that the shares have jumped above 4% in


Australia today but we note the transaction is still subject to


regulation and approval. It is expected to be completed by the end


of September. Could be a breaking news story when the regulators give


its approval. Thank you very much. I have to say, it is green arrows


across the board. The broader market in America, with another record high


on Wall Street. Markets across Asia doing well, a weaker dollar of the


back of what was said on the back of the Federal Reserve minutes. We will


cut that in a second. Let's look at Europe now. Slightly higher. Could


see another record high for the FTSE 100? Another record close. It is


interesting to see how markets are trading around the world and we will


talk about that in detail in a moment, but let's look ahead to what


is on Wall Street. On Thursday, Sears will be reporting


earnings. They warned investors in March there was a chance it may not


be able to continue operating after years of losses and declining sales.


But Sears has said it is expecting a net profit as it undertakes a plan


to cut $1.25 billion in costs this year. In contrast, dollar tree is


expecting stronger earnings this quarter and are boosted by a higher


in-store traffic. Several retailers have blamed low traffic in stores


for very weak sales. Finally, there will be a new company trading on the


New York Stock Exchange on Thursday. Wide-open West is the sixth largest


cable operator in the United States and will trade under the symbol Wow!


Joining us is Tom Stebenson, Investment Director


Good morning. Let's talk the Fed. I like your glasses. Where are your


glasses by the way? I just haven't got them on. All eyes were on the


Fed yesterday and expectation is still of June rate rise, but some


doubts creeping in yesterday, is that fair to say? Yes, two keywords,


the first was soon. The Fed rate setters said they felt if things


carry Dom on their current trajectory it would be appropriate


to raise interest rates soon. The second was transitory. The reason


why they think they will raise rate is because they think the recent


sockless in economy, softness in the inflation is transitory and it will


pass. The odds are very short on June rate rise and another one in


September and then potential will turn to how the Federal Reserve


starts to unwind its balance sheet. It has bought $4.5 trillion of bonds


to try to underpin the economy. It has two let them role off an


reversed that easing policy. In the meantime you have the SNP closing on


a high, the FTSE 100, it would suggest markets are on the up? Yes,


markets are looking at not rising interest rates, but the reason why


interest rates are rising. The reason why the Feds feel relaxed


about pushing rate is because the global economy is picking up pace


and that is what markets are focused on. For now, thank you. Retail


shopping disasters, have a ponder on back.


I meet the man who makes some of Hollywood's biggest


And without the big money pressure, Jason Blum tells me it means he can


You're with Business Live from BBC News.


Bicycle and Motoring chain Halfords saw a 10% drop in profits,


The retailer blamed the weak pound for driving up the cost of imports.


Andrew Walker has been looking at the figures.


Did you cycle in this morning? I normally would have done, but sadly


not. Let's talk numbers. Halfords, the same tale, the weak pound


affecting their bottom right? Yes, this is a business whose revenues


are in Stirling, selling stuff to British customers but has a high


proportion of its costs on imported goods. It has two convert sterling


into Borren currency. That has been reflected in a decline in the


profits despite relatively good performance on revenues. The chief


executive says she has been pleased with the performance in that


respect. The company puts a figure of ?14 million on the cost of the


decline in sterling. The way in which it has impacted its outgoings.


That is more than the decline in profits. It does suggest the company


is, if you like, getting on top of this issue. But it is an unwelcome


development for shareholders. It is a striking contrast compared with


many in the 100 share index, bigger companies who make a lot of money in


foreign currency, they have done well. But those more dependent on


the bridge 's consumer have suffered. If you look at the share


price, it fell sharply by 25% in the immediate aftermath of the


referendum. It has recovered a lot of the ground since car but not all


Thank you. Other retailers out, Pets At Home looking pretty good, they


are making their money in the grooming service and the veterinary


service as well. They saw a big rise in the veterinary business, up 25%,


but they are having to admit they will have to bring down their pet


food prices, which I would imagine for Pets At Home, that is your


bog-standard. I am just looking at that hairdo, quite a bow on the dog


in the picture. You're watching Business Live -


our top story... We are watching closely the price of


oil today, and Opec and non-Opec members who are meeting in Vienna to


decide on whether they will extend their supply cuts and whether that


will have any impact on prices. Something that might use a lot of


oil, a rocket launch. New Zealand has successfully


launched its first test rocket into space -


the work of a Kiwi-American The seventeen-metre high craft


took-off from a private launch pad on New Zealand's North Island


and is designed to carry small A company in New Zealand has sent


a rocket into space from the world's The launch was a success but


crucially didn't get into orbit, explained that for us? This is a


Little Rock it, much smaller than something you might see Nasa launch,


only 70 metres tall, and designed, as you say, the tiny cube satellites


that are revolutionising the markets. They made it into space,


took about three winners to get up there but not quite into orbit. The


company stressed this is just a test, in fact the launch was


codenamed hashtag it's a test, just to make sure everyone knows this is


not good for them, and they will launch later this year again, also a


test, then on the third test they will take a pay payload with them.


This fast developing market is really what they want to get into.


It is companies not countries in the space race at the moment, and it is


a beak -- a big leap forward for this.


Making films on a tight budget isn't easy -


One firm that's made its name with micro-budget films


One of its first films was Paranormal Activity.


It cost just $15,000 to make - but made nearly $200 million


It then went on to produce another horror film called Insidious -


production costs there were a bit higher -


And it's a niche it's continued to pursue.


Get Out - released in January this year -


has already made more than $230 million at the box


office but cost just $4.5 million to make.


So I caught up with the founder and chief executive


of Blumhouse Productions - Jason Blum.


And asked what makes these low budget films so different


It allows us to try very different things. We did the purge, get out,


split, all low-budget movies, but they wouldn't have got made at 820


or $15 million, typical studio budget, because their ideas were


such oddball ideas. But by doing low-budget movies we can try weird


ones. So talk us through the financing. This is very much about


not spending a lot of money up front, and then with the marketing


budget you manage to turn these movies into really big returns. The


green light about movies is very simple because again they are


low-budget, not a lot of risk. The real big moment for our movies is


whether or not they get a wide release around the world or not.


And, oddly, the marketing budget for our movies is six times the negative


cost. So our green light is we are going to release it in 3000 screens.


That we don't determine until after the movie is finished, we determine


it with a studio, and that is when we know we have a winner, when we


will get a big release. So what does this low-cost model do that you


couldn't do if you had a multi-million dollar budget? You


don't have two cast movie stars, you can kill the hero of the movie


halfway into it, it is a great freedom, and also not to have a 3000


screen release hanging over your head. So it really allows us to try


different things. Sometimes it works, sometimes it doesn't, but


when it doesn't work we don't get hurt too badly. If you had a massive


budget, what could you not do? Expensive movies by definition have


two appeal to all four quadrants of the audience, so the storytelling I


think gets watered down, and the decision is very much by committee.


The fun of movie-making is I think if this rated, the bigger the budget


is. Then they'll like the storytelling and everything else


gets compromised. We only only make a certain kind of movie, thrillers


and genre movies, which really benefit from low-budget. I don't


presume to think that every movie could be made on a low budget. If I


go and see a vengeance, we want to see -- if we go and see the


avengers. We want to see big budgets. You have to spend a bit


more money on TV, why is that? Micro-budget doesn't work the TV


because the television market is a much healthier market. The way we do


low-budget movies, everyone works are free, we don't take a fee, the


actors, the director, the writer, they all work for low pay scale, if


it works, people get paid, if it doesn't, they don't. For TV, in a


movie, we say we're not going to pay you but you get to do what you want


to do is very a feeling in the movie business. In television if you said


that, they would say it is good to hear that, but this guy over here is


going to pay me and I get to do what I want to do. So it is much more


competitive. For that reason micro-budget in TV is not the


solution. We have a different idea of how to crack TV but it's not


that. Are you ever surprised when you see the success of your movies,


how well they do? Well, a hit movie is a magical thing. No matter how


many times it happens, when we have one, get out was our most recent


success, and we thought it was going to do quite well, and it opened, and


it had a very good opening, not our best but a very good opening


weekend. But when we knew it was something special was the second


weekend, because typically genre movies dropped 50 to 60% from the


first weekend to the second. Yet Outcrop about forgiveness and. We


knew the magic had happened -- Get Out dropped about 20%. If I stop


getting thrilled it is time for me to do something else because that is


the fun of the business, that no one really knows until these movies come


out into the world, and when they resonate or connected a big way


there is better. Really interesting chat with him about how he does it


on the cheap. That brings in some massive returns on those films. Tom


is back and we are going to talk about President Trump, who is in


Brussels right now meeting with European leaders. There is lots to


discuss. But from the point of view of Brussels, they will be putting a


lot of pressure on the US president to stick to the Paris climate


accord. Front page of the Financial Times today. It follows on from his


meeting with the Pope yesterday, which was a similar theme. That's


right, when the Pope handed him one of the that can's in cyclicals, a


big report on climate change, to encourage him to changes thinking.


Donald Trump hasn't achieved everything he planned to deliver one


of the things he has done, a lot of executive orders reversing climate


change issues. The Europeans are very keen to change his view on


this. The German line is particularly interesting, because


what they are saying the President Trump is, look, it is not just jobs


or reversing climate change, you can have both, but actually these


measures can be good economic growth and the jobs as well. It is quite


interesting, because when you think about this, during the election


campaign he said many times he would rip up the Paris accord. When you


think about the time, the effort and the energy to get to these accords,


the transpacific partnership, Obamacare, Paris climate change, it


is years of negotiations and hours and hours of discussions.


Absolutely, and what we are seeing is a real split in the White House


actually between those who are really firmly against action against


climate change, and those who are more persuaded. I think Peter this


might be his daughter, Ivanka, and her husband Jared Kushner, who


really are much more along the European way of thinking that maybe


the president. Tom, thank you, really good to see you. I want to


talk about shops and retailing. You are getting in touch with us and we


have asked about the underestimation of the power of technology. This


went as I can't remember the last time I bought something in the


street. I use my phone and return it using the label. Not good for bricks


and mortar retailers. That is all from Business Live, we will see you


very soon. Good morning. Yesterday was the


warmest day of the year so far. We got to 26.6 Celsius in


Worcestershire. Today is actually going to be even warmer. Hot across


most parts of the UK and there


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