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, 22 March 23
MARKET INSIGHT - INTERMODAL
The crude tanker market continues to gather momentum as we head towards the end of 1Q2023, against a backdrop of strong U.S. exports paired with a ...
Wednesday, 22 March 23
WILL LOWER GAS PRICES SPARK SWITCHING IN EUROPE AND ASIA?
Record high prices devastated demand for gas and LNG across Asia and Europe last year. But with prices falling, companies are starting to re-evalua ...
Monday, 20 March 23
NTPC MULLS 5.4 MILLION TONNES COAL IMPORT IN FIRST HALF OF 2023-24: PTI
State-run power giant NTPC is planning to import around 5.4 million tonnes of coal to meet the supply shortage during the first half 2023-24 fiscal ...
Monday, 20 March 23
S. AFRICA’S EXXARO RESOURCES SAYS COAL PRICES COOLING OFF - REUTERS
South Africa’s Exxaro Resources on Thursday posted a 28% jump in 2022 profit after seeing average coal prices surge more than 150%, but warne ...
Saturday, 18 March 23
RUSSIAN LNG EXPORTS TO EUROPE REMAIN HIGH - VESSELS VALUE
Russian LNG exports to Europe remained at very high levels in February at 3.6 million CBM, following a 13 month high in January of 4.1 million CBM. ...
|
|
|
Showing 121 to 125 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- European Bulk Services B.V. - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Indonesian Coal Mining Association
- Riau Bara Harum - Indonesia
- Romanian Commodities Exchange
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Planning Commission, India
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- The State Trading Corporation of India Ltd
- Georgia Ports Authority, United States
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Meralco Power Generation, Philippines
- Globalindo Alam Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- Ceylon Electricity Board - Sri Lanka
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Power Finance Corporation Ltd., India
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- Agrawal Coal Company - India
- Gujarat Sidhee Cement - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Wilmar Investment Holdings
- PTC India Limited - India
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- Merrill Lynch Commodities Europe
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Manunggal Multi Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- Mintek Dendrill Indonesia
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Altura Mining Limited, Indonesia
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- IEA Clean Coal Centre - UK
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- White Energy Company Limited
- Sical Logistics Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Coalindo Energy - Indonesia
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- GAC Shipping (India) Pvt Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- GVK Power & Infra Limited - India
- Eastern Energy - Thailand
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- Makarim & Taira - Indonesia
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Central Electricity Authority - India
- CNBM International Corporation - China
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Mjunction Services Limited - India
- New Zealand Coal & Carbon
- Kideco Jaya Agung - Indonesia
- Kumho Petrochemical, South Korea
- The University of Queensland
- Malabar Cements Ltd - India
- Uttam Galva Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Straits Asia Resources Limited - Singapore
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Kaltim Prima Coal - Indonesia
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Indo Tambangraya Megah - Indonesia
- PNOC Exploration Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Global Coal Blending Company Limited - Australia
- Edison Trading Spa - Italy
- Kalimantan Lumbung Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Oldendorff Carriers - Singapore
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Star Paper Mills Limited - India
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- Samtan Co., Ltd - South Korea
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- India Bulls Power Limited - India
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- LBH Netherlands Bv - Netherlands
- Leighton Contractors Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Savvy Resources Ltd - HongKong
- Independent Power Producers Association of India
- Minerals Council of Australia
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Baramulti Group, Indonesia
|
| |
| |
|
