JPMorgan Chase & Co. Presents at The 2020 Louisiana Energy Conference, May-27-2020 08:00 AM - NYSE:JPM

NYSE:JPM

Scott Schnipper, the Global Head of Foreign Exchange, Commodities, and Rates for JPMorgan's Private Bank, delivered a keynote address at the 2020 Louisiana Energy Conference. His presentation covered five key topics:

1. Path and Impact of COVID-19:

   • Described the unprecedented impact of COVID-19 on the global economy and markets.
   • Noted that the U.S. was the worst-hit country.
   • Discussed the effectiveness of social distancing measures in slowing the spread of the virus.
   • Mentioned that reopening economies may be less risky than initially thought, based on data showing infection rates declining after reopening.

2. Economic Fallout:

   • Highlighted the unprecedented economic impact, with global Purchasing Managers’ Index (PMI) plunging to historically low levels.
   • Mentioned the severe employment situation, with U.S. unemployment rates expected to reach 20%.
   • Predicted a significant GDP decline, possibly the worst since the Great Depression.
   • Praised the unprecedented policy response by governments and central banks to mitigate the economic impact.

3. Crude Oil Market:

   • Emphasized the volatility of crude oil prices, noting the unprecedented movements in the market.
   • Discussed the imbalance between supply and demand, with a peak mismatch of 20 million barrels.
   • Charted the annual change in demand, showing the worst shock in history.
   • Mentioned specific product demands, such as gasoline and diesel, which are expected to recover more quickly than jet fuel.

4. Supply-Side Impacts:

   • Explained the breakdown of negotiations between OPEC and Russia, leading to a scramble for market share.
   • Noted the rapid build-up of inventories and the scarcity of storage capacity.
   • Highlighted the importance of compliance with production cuts by OPEC members.

5. Path Forward:

   • Expected a 1.7 billion barrel build in inventories over the first half of the year, followed by a drawdown in the latter half.
   • Predicted a price environment of around $30 per barrel in 2021, contingent on inventory levels.
   • Discussed real-time indicators of demand recovery, such as activity levels returning to normal.
   • Mentioned the decline in rig counts and the importance of maintaining production levels off-line to rebalance the market.
   • Addressed the impact of capital markets on the energy sector, noting its reduced systemic importance.

6. Capital Markets and Energy Sector:

   • Observed the reduced importance of the energy sector in benchmark indices, with a decline from 15% to 2% of the S&P 500 over the last decade.
   • Noted the collapse in high-yield bond issuance and the closure of capital markets to energy companies.
   • Mentioned the strategic and national security perspective, emphasizing the importance of the U.S. energy sector for national security.

During the Q&A session, Scott Schnipper addressed questions regarding the oversupply of crude, the potential for production ramp-ups by Saudi Arabia and Russia, the future of U.S. production, the focus on returns and debt reduction, and the role of ESG in the industry recovery.

Joe Bonavita, the Executive Director with JPMorgan Private Bank in New Orleans, made the following comments during the 2020 Louisiana Energy Conference:

1. Introduction and Praise for the Conference:

   • He thanked Al Petrie and the team for successfully transitioning the conference to a virtual format amidst the new reality created by the COVID-19 pandemic.
   • He commended the organizers for maintaining the quality and breadth of the conference, which provides a comprehensive view of various aspects of the energy industry and the macroeconomic environment.

2. Importance of the Energy Industry:

   • He highlighted the critical role of the energy industry in Louisiana's economy and its impact on JPMorgan's clients, including individuals and corporations within the private bank, as well as commercial and business banking divisions.

3. Introduction of Keynote Speaker:

   • He introduced Scott Schnipper, the Global Head of Foreign Exchange, Commodities, and Rates for the Private Bank at JPMorgan, as the keynote speaker for the conference.
   • This was Schnipper's second year providing the keynote speech, and Bonavita expressed enthusiasm about having him back.
   • He provided a brief overview of Schnipper's role and responsibilities, mentioning that Schnipper oversees a team of 25 professionals dedicated to investment strategy, idea generation, derivative structuring, execution across asset classes and geographies, with a focus on risk management and portfolio diversification.

4. Transition to Keynote Speech:

   • He concluded his introduction by thanking Al Petrie and expressing anticipation for Schnipper's speech, indicating that he would pass the microphone to Schnipper to begin the conference.