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This Goldman Sachs-backed startup tracks world's oil glut from space

Orbital Insight is measuring shadows from space to trace the world’s oil glut. Orbital Insight Founder & CEO James Crawford joins Yahoo Finance’s Zack Guzman to discuss.

Video Transcript

ZACK GUZMAN: Meantime, though, on the oil front, that is continuing to be one of the most pressured areas, as we saw energy trade off of all this and then come back when we saw the rebound in crude prices. But right now, a lot of questions in terms of where we go, considering how much the supply issue has grown in recent weeks. And for more on that, I want to bring in our next guest, the CEO and founder of Orbital Insight, Jimmy Crawford joins us now.

And this is a very interesting company because there is a lot of technology in tracking oil, but this, perhaps, might be the most interesting way of tracking the supply glut we're seeing right now. It's a startup backed by Goldman Sachs. It's measuring the shadows from space to see how much supply issues have really ramped up here in recent weeks. And Jimmy, I guess that would be the first question for me would be how are you actually doing that, and what are you seeing play out as more producers continue to pump oil and run into the issue of where they're going to put it?

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JAMES CRAWFORD: Hey Zack, thanks for having me. So it's a really interesting time to be in the satellite business, in the AI business because we are now able to get imagery from over 200 satellites, both visible satellites as well as radar satellites. And so we can get most of the world every other day, and there's about 25,000 oil tanks in the world storing about $3.2 billion barrels of oil.

So there's a lot of tanks to look at, and most of them are not all that well tracked by the government or by the government in the country that they're in, or they're tracked way, way after. The data will come weeks to months later. So we're able to see those tanks in the imagery, and we're able to look at the shadows cast by the sides of the tank on the floating lid and use a little trigonometry and figure out how full all those tanks are. And you're right, we've been seeing really historic increases in the amount of storage across-- around the globe.

ZACK GUZMAN: Yeah, well, I mean, when you look into that increase in storage, that's been the main question there is just because obviously, we've been dealt a pretty significant demand shock when we think about, you know, across the globe, people not going out. Obviously, production for a lot of different industries paring back, as we've hit this coronavirus lockdown.

When you look at that, though, I mean, clearly, demand and supply have been a mismatched, when we think about all of the producers still pumping. You know, OPEC has tried to address that problem. But what have you seen, what has your data showed, in terms of, you know, the demand for storage space now on tankers and everything else, relative to what it might have been just a couple months ago?

JAMES CRAWFORD: So we're seeing continued increases and, like I say, really historic numbers. So as I said, there's about 3.2 billion barrels in the world, and there are about 6 billion barrels of storage. So globally, we're at about 55.6% utilized. However, that number, that storage number is up about 206 million barrels year-on-yeah, and it's continuing to grow.

So we're seeing OPEC inventories up 21 million barrels in the last 30 days, Chinese inventory levels up 20 million barrels in the last 30 days. So as long as the coronavirus slowdown continues, we seem to just be building. And I think that, more than anything else, is what's spooking the markets.

ZACK GUZMAN: Well, the other good thing, too, though, when you think about what you guys are able to watch here is that clearly this is not just an America story, though we are looking into bankruptcies as American producers have a higher cost to produce oil here, relative to their competitors across the globe. But I mean, it is a global story in the way that right now, all the markets are working together.

You have big producers like Russia and Saudi Arabia trying to figure out what to do with it as well. And some hope that maybe China, as it moves out of their own problems with coronavirus, might be quick to start using oil. So what have you seen, in terms of where these different markets are at across the globe, and what that might actually say about how quickly, maybe too optimistically if you're trying to bet on the timing of it, when you might be able to start to see a supply come back in line with the demand we're seeing.

JAMES CRAWFORD: Well, to give you another data point, one of the other things we're able to see in our satellite imagery is cars on the road. So we're looking at the ring roads around Beijing, and we saw a precipitous decline, like down to almost nothing right in the middle of coronavirus in China, and they have obviously come out of lockdown. But we are still only up to about 50% of the car traffic pre-coronavirus in Beijing. And Beijing is not even Wuhan, right?

So even in China, we are somewhere below 50% previous total miles driven based on our satellite imagery. So it has not been, in China, a V-shaped or U-shape recovery. It's been very L-shaped, in terms of driving behavior. So I think that alone suggests that the demand is going to take some time to start to recover.

And I think initially, it looked like the Chinese were taking the opportunity-- and they may still be doing this to some extent-- taking the opportunity at the cheaper prices just to store oil. And so we saw a lot of tanks filling in China and probably, as I say, just opportunistically storing oil while it's cheap. But at some point, obviously, you run out the limits of what you can do with that. And now people, as you said, are starting to put oil in tankers and just anchoring them, which is an incredibly expensive way to store oil.

ZACK GUZMAN: Yeah, real quick, last on that point before we shift to some other uses of your satellite imagery here, when you look at the way that China might be wanting to I guess capitalize on cheap oil prices, considering they are the largest consumer, when we look at-- when you try and dig into that, is there any indication that they're running into similar storage issues like we've seen here in the US? I mean, it does seem like, at this point as we saw, you know, negative prices here, there are issues with our storage. But over there in China, how do you compare the situations you're seeing play out?

JAMES CRAWFORD: There-- both are at a significant-- historically high utilization rates of storage. But neither country is actually honestly running out at this point. I think the markets are more forward-looking than that. What the markets are actually pricing in is the fact that if the supply demand mismatch continues, it can't continue, right? We do run out. So I think it's not the case that we are literally out in either country, but both countries are higher than they have been in the history of data of oil storage. So it's a historic high, and it shows no signs of slowing down in both countries. And obviously, I think that's what's freaking the markets out.

ZACK GUZMAN: Let's shift from one market that's clearly experiencing some problems to another, that being America's food supply. We've been hearing a lot of issues and a lot of alarms being raised by some of the major producers of meat in this country when we look at Tyson Foods and Smithfield both having to shut down factories and production lines tied to America's meat supply. I know you guys are tracking that as well.

But what are you making of kind of the concerns that are being raised on that front? Potentially, we're hearing also warnings that meat might actually be impacted on the grocery store shelves as soon as this week for some Americans trying to go out there and buy groceries. So what are you seeing in that market and kind of the disruption that we've seen from the coronavirus there?

JAMES CRAWFORD: Well, we use a variety of different sensors to look at the world, and one of them is anonymized cellphone counts. So we can't tell whose cell phone is where, but we can tell you inside a meat packing plant, roughly how many cell phones are in the plant. And when we-- when a plant like Smithfield slows down and then closes, we can actually see that, and we did see this slowdown and closure in Smithfield.

Then we're also seeing other plants, like Abbyland, actually starting to increase their workforce. So we will see more cell phones, more shifts, more workers. So there's obviously some sort of rebalancing going on. I think it's too early to say what the total impact will be, but it's something that we are now starting to mark and track, you know, all the major meat-producing plants in the US. And we'll be having better and better data on that over the next couple of weeks as the situation develops.

ZACK GUZMAN: Yeah, and just-- I mean, it's just-- it's kind of surprising to see that this can all be tracked from space and using cell phone towers. I mean, this is kind of where we're at. This is the age of technology to try and track all this as well. You don't need to have boots on the ground. But just an amazing application of technology to track all of this. You'll have to bring us the updates when you get them on the food supply front. But Jimmy Crawford, Orbital Insight founder and CEO, thank you so much for joining us, sir, appreciate it.

JAMES CRAWFORD: Thanks, Zack.