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.
|
|
Thursday, 02 April 15
NEWBUILDING ORDERS FOR DRY BULK CARRIERS "DRY" UP
Newbuilding ordering activity remained subdued over the course of the past week, as ship owners are wary of adding further tonnage to an already pr ...
Wednesday, 01 April 15
SUPRAMAX & HANDY: RATES HELD STEADY TOWARDS THE WEEKEND
“Despite the fact that the Dry Bulk market closed off on the green last week, sentiment didn't improve by any means, not only because of ...
Wednesday, 01 April 15
WEEKLY SHIPPING MARKET UPDATE - INTERMODAL
There is no doubt that we are still witnessing a very challenging and at the same time very uncertain market, both with respect to dry chartering a ...
Wednesday, 01 April 15
Q4' 15 INDONESIA COAL SWAP CLOSED AT $45.15 W/E 27 MARCH 2015
COALspot.com: Indonesian coal swap for delivery Q2' 2015 drops month on month and week over week.
The Q2 swap declined US$ 1.54 (3.24%) mo ...
Tuesday, 31 March 15
RICHARDS BAY COAL SWAPS GAIN WEEK OVER WEEK
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month but increased week on week.
The Q2 swap has ...
|
|
|
Showing 3096 to 3100 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Electricity Generating Authority of Thailand
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Power Finance Corporation Ltd., India
- Billiton Holdings Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- Cement Manufacturers Association - India
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Parliament of New Zealand
- Eastern Energy - Thailand
- Maheswari Brothers Coal Limited - India
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- Bayan Resources Tbk. - Indonesia
- Bhushan Steel Limited - India
- ICICI Bank Limited - India
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Minerals Council of Australia
- SMG Consultants - Indonesia
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Commonwealth Bank - Australia
- CIMB Investment Bank - Malaysia
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Timah Investasi Mineral - Indoneisa
- Ministry of Mines - Canada
- Siam City Cement PLC, Thailand
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- Australian Coal Association
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- Formosa Plastics Group - Taiwan
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Kapuas Tunggal Persada - Indonesia
- Posco Energy - South Korea
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- Essar Steel Hazira Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Carbofer General Trading SA - India
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- PNOC Exploration Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Bhoruka Overseas - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Barasentosa Lestari - Indonesia
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- CNBM International Corporation - China
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Mjunction Services Limited - India
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- Sical Logistics Limited - India
- McConnell Dowell - Australia
- Miang Besar Coal Terminal - Indonesia
- PTC India Limited - India
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Coal and Oil Company - UAE
- White Energy Company Limited
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Iligan Light & Power Inc, Philippines
- Renaissance Capital - South Africa
- Planning Commission, India
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Altura Mining Limited, Indonesia
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- Karaikal Port Pvt Ltd - India
- Wilmar Investment Holdings
- Economic Council, Georgia
- Kepco SPC Power Corporation, Philippines
- Edison Trading Spa - Italy
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Romanian Commodities Exchange
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Electricity Authority, New Zealand
- Banpu Public Company Limited - Thailand
- Binh Thuan Hamico - Vietnam
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- GN Power Mariveles Coal Plant, Philippines
- Heidelberg Cement - Germany
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- India Bulls Power Limited - India
- Siam City Cement - Thailand
- Petron Corporation, Philippines
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Anglo American - United Kingdom
- OPG Power Generation Pvt Ltd - India
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- International Coal Ventures Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Indonesian Coal Mining Association
- Port Waratah Coal Services - Australia
- Pendopo Energi Batubara - Indonesia
- Lanco Infratech Ltd - India
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Singapore Mercantile Exchange
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Sindya Power Generating Company Private Ltd
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
|
| |
| |
|
