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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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Thursday, 26 March 15
KYUSHU ELECTRIC POWER OF JAPAN HAS JOINED GLOBALCOAL ONLINE COAL TRADING PLATFORM
globalCOAL® announced today that Kyushu Electric Power, one of Japan’s largest utility companies, has joined its online coal trading plat ...
Wednesday, 25 March 15
MARKET INSIGHT: TANKER CHARTERING - KATERINA RESTIS
The 1st of January 2015, as broadly reported, denoted the beginning date of new and progressive emission regulations for vessels operating within t ...
Wednesday, 25 March 15
AUSTRALIA SET TO ONCE AGAIN BE THE WORLD'S LARGEST COAL EXPORTER - COAL, MINERALS COUNCIL OF AUSTRALIA
Greg Evans, Executive Director - Coal, Minerals Council of Australia
Media Release: The latest Resources and Energy Quarterly published by the ...
Wednesday, 25 March 15
AUSTRALIA UPSTREAM ENERGY FIRMS FACE RISING OIL PRICE EXPOSURE - FITCH
Fitch Ratings says the Australian oil and gas companies involved in exploration and production face higher exposure to oil price-linked revenues, w ...
Wednesday, 25 March 15
2014 : UK COAL IMPORTS DECLINED 17%; GERMANY COAL IMPORTS UP 6%
Hard Coal Market 2014: Despite The Energy Turnaround, Hard Coal Imports To Germany Rise By More Than 6%, Although Hard Coal-Fired Power Generation ...
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Showing 3111 to 3115 news of total 6871 |
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- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Coal and Oil Company - UAE
- Wilmar Investment Holdings
- CIMB Investment Bank - Malaysia
- Semirara Mining and Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Indika Energy - Indonesia
- Independent Power Producers Association of India
- Economic Council, Georgia
- Binh Thuan Hamico - Vietnam
- Electricity Generating Authority of Thailand
- Directorate Of Revenue Intelligence - India
- Anglo American - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cement Manufacturers Association - India
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Central Java Power - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Meenaskhi Energy Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- SN Aboitiz Power Inc, Philippines
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- Savvy Resources Ltd - HongKong
- Tamil Nadu electricity Board
- Kepco SPC Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Jaiprakash Power Ventures ltd
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- Posco Energy - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Goldman Sachs - Singapore
- Bhoruka Overseas - Indonesia
- Grasim Industreis Ltd - India
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- Aboitiz Power Corporation - Philippines
- Aditya Birla Group - India
- Sarangani Energy Corporation, Philippines
- Vizag Seaport Private Limited - India
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
- San Jose City I Power Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Barasentosa Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Australian Coal Association
- ICICI Bank Limited - India
- Semirara Mining Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Antam Resourcindo - Indonesia
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Parry Sugars Refinery, India
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- Bukit Makmur.PT - Indonesia
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Kalimantan Lumbung Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- The Treasury - Australian Government
- Sree Jayajothi Cements Limited - India
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Toyota Tsusho Corporation, Japan
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Renaissance Capital - South Africa
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- Deloitte Consulting - India
- Gujarat Mineral Development Corp Ltd - India
- Larsen & Toubro Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The State Trading Corporation of India Ltd
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Carbofer General Trading SA - India
- Borneo Indobara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Billiton Holdings Pty Ltd - Australia
- Bhushan Steel Limited - India
- MS Steel International - UAE
- Siam City Cement - Thailand
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Energy Development Corp, Philippines
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Ambuja Cements Ltd - India
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Vedanta Resources Plc - India
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- Agrawal Coal Company - India
- Planning Commission, India
- Electricity Authority, New Zealand
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- LBH Netherlands Bv - Netherlands
- Attock Cement Pakistan Limited
- SMG Consultants - Indonesia
- Coalindo Energy - Indonesia
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Kartika Selabumi Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- ASAPP Information Group - India
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Kideco Jaya Agung - Indonesia
- Formosa Plastics Group - Taiwan
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Baramulti Group, Indonesia
- Edison Trading Spa - Italy
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GVK Power & Infra Limited - India
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