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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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Friday, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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Showing 26 to 30 news of total 6871 |
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- Petrochimia International Co. Ltd.- Taiwan
- Maheswari Brothers Coal Limited - India
- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Kapuas Tunggal Persada - Indonesia
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Metalloyd Limited - United Kingdom
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Bhoruka Overseas - Indonesia
- The State Trading Corporation of India Ltd
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- McConnell Dowell - Australia
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Attock Cement Pakistan Limited
- SMG Consultants - Indonesia
- VISA Power Limited - India
- CIMB Investment Bank - Malaysia
- Singapore Mercantile Exchange
- Simpson Spence & Young - Indonesia
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Banpu Public Company Limited - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Australian Coal Association
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Bharathi Cement Corporation - India
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Chettinad Cement Corporation Ltd - India
- Port Waratah Coal Services - Australia
- Ministry of Transport, Egypt
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Tamil Nadu electricity Board
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Xindia Steels Limited - India
- Merrill Lynch Commodities Europe
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- IEA Clean Coal Centre - UK
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Africa Commodities Group - South Africa
- Billiton Holdings Pty Ltd - Australia
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Samtan Co., Ltd - South Korea
- Cigading International Bulk Terminal - Indonesia
- Cement Manufacturers Association - India
- Mintek Dendrill Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- Global Business Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- PNOC Exploration Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Indian Oil Corporation Limited
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Jindal Steel & Power Ltd - India
- The Treasury - Australian Government
- GMR Energy Limited - India
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bangladesh Power Developement Board
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- Edison Trading Spa - Italy
- Larsen & Toubro Limited - India
- Coastal Gujarat Power Limited - India
- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Sree Jayajothi Cements Limited - India
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Vizag Seaport Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Latin American Coal - Colombia
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Bhatia International Limited - India
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Mjunction Services Limited - India
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Borneo Indobara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tata Chemicals Ltd - India
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Makarim & Taira - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- MS Steel International - UAE
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Bahari Cakrawala Sebuku - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Goldman Sachs - Singapore
- Minerals Council of Australia
- Thiess Contractors Indonesia
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- Siam City Cement PLC, Thailand
- The University of Queensland
- Electricity Generating Authority of Thailand
- Power Finance Corporation Ltd., India
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
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