We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Tuesday, 10 March 15
OIL PRICE FORECASTING - IGNORE THE EXPERTS: COLIN MARSHALL
 KNOWLEDGE TO ELEVATE
Experts put themselves on a pedestal, making claims to have special forecasting abilities for oil price trends. They, too, one way or another, charge for making those claims. Because of this, they deserve to be investigated. And, depending on the outcome of the investigation, they may also be deserving of ridicule.So, what is driving the oil price today? Many commentators have noted that today, there are a number of hypotheses, phenomena and factors all contributing to the vagaries of the oil price:
Rising shale hydrocarbon supply. Shale oil and gas ramping up, as producers have recognized that shale production is more prolific than expected. Furthermore, the certainty of shale hydrocarbon production has proved attractive (compared with normal exploration), following more of a “production line” model, where every dollar injected delivers a reasonably certain production.
Worldwide oil demand is dropping and not just in China. Efficiencies are resulting in reduced demand. Winters are generally milder. Slowly but surely, global users are switching to gas and dropping the price as technology improves and economies of scale kick in.
Cars create about 60 percent of the demand for oil, and the introduction of gas-powered and electric vehicles is increasing. Solar power is also increasing and could become a material alternative energy source in the medium term.
The Middle East is unstable. The potential for severe supply disruption from war, political (“Arab Spring”) uprisings or even sanctions adds tension and uncertainty into the already precarious supply and demand balancing acts. Erratic production from war-torn countries like Iraq and Libya often surprise the market with actual supply far different from predictions.
The Islamic State (IS) scares analysts as well. The market is easily spooked by terrorism, notably IS, who frightens even al-Qaeda. This threat of terrorist activities tends to keep prices high or at least volatile.
Prices need to support budgets. Many countries rely heavily on oil and gas revenues to support their national budgets.
In other words, once prices drop, their pain may force them to cut production themselves if they are Organization of Petroleum Exporting Countries (OPEC) members, or at least put significant pressure on swing producers to reduce production to increase prices.
Saudi believes in supply and demand. Saudi Arabia, and hence OPEC, has maintained a firm stance not to cut production to maintain prices, as they believe that any reduction would probably not increase oil prices, as the shale producers would simply fill the gap.
By allowing oil prices to fall, Saudi hopes the shale producers will reduce production, and not make material shale-related infrastructure capital commitments.
Supply will drop, prices rise, allowing OPEC to maintain their market share, at higher prices, in the future.
Saudi doesn’t believe in supply and demand — it’s all geo-politics. Saudi wants to see the end of the current Syrian regime, as does Qatar, as Syria blocks their access to European gas.
Despite this anti-Syria alignment, Qatar allegedly supports IS as a catalyst to topple Syria whereas Saudi chooses to allow oil prices to free-fall, to put pressure on Russia to stop supporting Syria, a position the US allegedly supports.
Putin is unlikely to capitulate as giving central Europe an alternative gas supply to mother Russia may bring even more pain than low oil prices.
Reduced costs will mitigate the lower prices. Some ambivalence toward low prices, especially by the majors, comes from the fact that costs are expected to eventually drop as inefficiencies (“fat”) are taken out of various components of the energy value chain.
In other words, providing one has the resources to endure the period until costs “catch-up” and reduce sufficiently, producers should eventually see a return to the profits they were previously receiving, even in a low oil-price environment.
Work programs are committed. Some companies have work commitments that cannot be immediately adjusted as a result of oil price changes.
Hedges give some short-term protection. Some companies will have taken out oil price hedges and this will have protected them from low oil prices, disincentivizing them to reduce production — but these hedges will drop off soon.
Two primary observations develop from this long list: first, there are a lot of points, perhaps suggesting that we really cannot expect to make a sensible prediction.
Second, there are arguments on both the supply and demand side, making anyone who tediously repeats the platitude about “the oil price being simply about supply and demand” appears somewhat simple-minded.
Whilst people may believe that their (or others) actions affect or manipulate the oil price, the reality may be that the consequences of those actions are of minor importance only.
The low oil price fluctuations are possibly due to unimagined and unfathomable factors, or complex combinations of factors.
The bottom line is that the world is much more complex these days and this makes the oil price difficult to predict. Even the fact that most commentators today believe that the oil price will stay low for at least a year or so should be taken with a grain of salt — nobody really knows.
A single war or major terrorist action could have catastrophic consequences on oil prices.
So what will happen to the oil price? As one with no pretensions of having knowledge, I predict oil price will swing in a US$50-100/per barrel range for the next few years or so, then gradually rise as population, education, prosperity and demand continues to rise, but still swinging in a fairly large range.
This $50-100/bbl range is justified as follows: Putting aside all the excuses for not being able to make predictions, including the obfuscating geopolitical conspiracy theories, it appears that a major factor is the addition of large quantities of shale hydrocarbons on the market, accessible as a result of new technology.
As oil prices increased an alternative has appeared, today in the form of shale hydrocarbons.
Shale oil is believed to cost around $85/bbl to produce — and a well’s production declines rapidly, falling by about 60 percent in the first year alone. In other words, shale hydrocarbons need new, expensive wells continuously to maintain production — below $85/bbl this will not happen and supply will reduce as wells are not drilled, increasing demand.
Recognizing that price does not rebound immediately, that there is a lag or elasticity to the price, prices may drop to a natural floor of around $50, by which point under most circumstances demand will send the price north once again.
The longer oil is “low”, then the more quickly it will swing back and likely over-shoot the $85/bbl ceiling, perhaps up to around $100/bbl, before inevitably descending once again.
Hence I believe the price will be around $50-100, the period and magnitude of the changes primarily in response to the ongoing geopolitical parlor games.
Some may accuse me of protecting myself by suggesting such a large range, but in fact I am specifically predicting there will be fluctuations in that bandwidth, with an average price around $75/bbl over the next few years.
I do, however, believe it is beyond the ability of men to predict the exact shape of the swing cycle, in terms of the period and cycle frequency.
Source: The Jakarta Post
_________________
The writer has been working in the oil and gas business for about 30 years.
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
|
|
|
Showing 46 to 50 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Bukit Makmur.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- Minerals Council of Australia
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Timah Investasi Mineral - Indoneisa
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Chamber of Mines of South Africa
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Bukit Baiduri Energy - Indonesia
- Vizag Seaport Private Limited - India
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- White Energy Company Limited
- Dalmia Cement Bharat India
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Karbindo Abesyapradhi - Indoneisa
- ICICI Bank Limited - India
- IEA Clean Coal Centre - UK
- Uttam Galva Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- South Luzon Thermal Energy Corporation
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Port Waratah Coal Services - Australia
- Eastern Coal Council - USA
- Indogreen Group - Indonesia
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bhushan Steel Limited - India
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Toyota Tsusho Corporation, Japan
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- GMR Energy Limited - India
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- Globalindo Alam Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Carbofer General Trading SA - India
- Global Green Power PLC Corporation, Philippines
- Romanian Commodities Exchange
- Global Coal Blending Company Limited - Australia
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Aditya Birla Group - India
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Energy Development Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Mintek Dendrill Indonesia
- Agrawal Coal Company - India
- Semirara Mining Corp, Philippines
- McConnell Dowell - Australia
- New Zealand Coal & Carbon
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Commonwealth Bank - Australia
- Parliament of New Zealand
- Kepco SPC Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Price Waterhouse Coopers - Russia
- Independent Power Producers Association of India
- Merrill Lynch Commodities Europe
- Kalimantan Lumbung Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Interocean Group of Companies - India
- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Deloitte Consulting - India
- Petron Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Metalloyd Limited - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Mercator Lines Limited - India
- Central Electricity Authority - India
- Marubeni Corporation - India
- VISA Power Limited - India
- Orica Australia Pty. Ltd.
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Kumho Petrochemical, South Korea
- Ministry of Mines - Canada
- Australian Commodity Traders Exchange
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- Australian Coal Association
- Mjunction Services Limited - India
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Savvy Resources Ltd - HongKong
- European Bulk Services B.V. - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- The University of Queensland
- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- PTC India Limited - India
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Coal and Oil Company - UAE
- Africa Commodities Group - South Africa
|
| |
| |
|
