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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
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The writer has been working in the oil and gas business for about 30 years.
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Tuesday, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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Showing 101 to 105 news of total 6871 |
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- Attock Cement Pakistan Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GVK Power & Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Sical Logistics Limited - India
- Global Business Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- MS Steel International - UAE
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- Vedanta Resources Plc - India
- Bhushan Steel Limited - India
- Carbofer General Trading SA - India
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Ministry of Transport, Egypt
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- Lanco Infratech Ltd - India
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- Standard Chartered Bank - UAE
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Kaltim Prima Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- SMC Global Power, Philippines
- Minerals Council of Australia
- Central Java Power - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Xindia Steels Limited - India
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Intertek Mineral Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- Trasteel International SA, Italy
- Australian Coal Association
- Siam City Cement PLC, Thailand
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- Petron Corporation, Philippines
- VISA Power Limited - India
- TeaM Sual Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Goldman Sachs - Singapore
- OPG Power Generation Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Indonesian Coal Mining Association
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Alfred C Toepfer International GmbH - Germany
- Interocean Group of Companies - India
- Mjunction Services Limited - India
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- Altura Mining Limited, Indonesia
- Siam City Cement - Thailand
- San Jose City I Power Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Electricity Authority, New Zealand
- Sakthi Sugars Limited - India
- Kepco SPC Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Africa Commodities Group - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Posco Energy - South Korea
- Aditya Birla Group - India
- Larsen & Toubro Limited - India
- Heidelberg Cement - Germany
- PetroVietnam Power Coal Import and Supply Company
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Simpson Spence & Young - Indonesia
- Manunggal Multi Energi - Indonesia
- The University of Queensland
- Dalmia Cement Bharat India
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Jaiprakash Power Ventures ltd
- GMR Energy Limited - India
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Coastal Gujarat Power Limited - India
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Straits Asia Resources Limited - Singapore
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Romanian Commodities Exchange
- Vizag Seaport Private Limited - India
- Bangladesh Power Developement Board
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Gujarat Sidhee Cement - India
- Holcim Trading Pte Ltd - Singapore
- Ceylon Electricity Board - Sri Lanka
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- White Energy Company Limited
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Rio Tinto Coal - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Commonwealth Bank - Australia
- India Bulls Power Limited - India
- Tata Chemicals Ltd - India
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