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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 $75/bbl over the next few years.
I do, however, believe it is beyond the ability of men to predict the exact shape of the swing cycle, in terms of the period and cycle frequency.
Source: The Jakarta Post
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The writer has been working in the oil and gas business for about 30 years.
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Tuesday, 24 March 15
A WEAK WEEK FOR FOB INDONESIA COAL SWAP
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 2.48 (5.12%) month ...
Tuesday, 24 March 15
RICHARDS BAY COAL SWAP FOR DELIVERY Q2 CLOSED $ 1.87 HIGHER COMPARED TO Q3 CLOSING PRICE
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and week on week.
The Q2 swap has dropped U ...
Tuesday, 24 March 15
ARGUS MEDITERRANEAN SOLID FUELS 2015 CONFERENCE | 2-3 JUNE, ISTANBUL
Press Release: Argus Media is proud to announce Argus Mediterranean Solid Fuels, which will be held in Istanbul,on 2-3February.
Argus produces ...
Monday, 23 March 15
IS OIL GETTING READY TO PLUNGE BELOW $40? - FORBES
KNOWLEDGE TO ELEVATE
In my last crude oil market update in late-February, I expressed my skepticism toward the oil price rebound. Since then, ...
Monday, 23 March 15
Q4' 2015 FOB NEWCASTLE COAL SWAPS DECLINED 6.79% M-O-M; 2.55% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 3.42 per MT (-6.33%) month over month and US$ 1.37 (-2.77%) we ...
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- Ind-Barath Power Infra Limited - India
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Medco Energi Mining Internasional
- Salva Resources Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Star Paper Mills Limited - India
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Metalloyd Limited - United Kingdom
- San Jose City I Power Corp, Philippines
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Mercuria Energy - Indonesia
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- ASAPP Information Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Electricity Generating Authority of Thailand
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- Petron Corporation, Philippines
- Mintek Dendrill Indonesia
- Antam Resourcindo - Indonesia
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Tamil Nadu electricity Board
- Rashtriya Ispat Nigam Limited - India
- Intertek Mineral Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Posco Energy - South Korea
- GVK Power & Infra Limited - India
- Australian Coal Association
- Agrawal Coal Company - India
- Gujarat Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Ministry of Finance - Indonesia
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Indian Oil Corporation Limited
- Kaltim Prima Coal - Indonesia
- Port Waratah Coal Services - Australia
- International Coal Ventures Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Dalmia Cement Bharat India
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- MS Steel International - UAE
- Parliament of New Zealand
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- Australian Commodity Traders Exchange
- Oldendorff Carriers - Singapore
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Romanian Commodities Exchange
- Mjunction Services Limited - India
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- PowerSource Philippines DevCo
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- AsiaOL BioFuels Corp., Philippines
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- Directorate General of MIneral and Coal - Indonesia
- Carbofer General Trading SA - India
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- Orica Mining Services - Indonesia
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Trasteel International SA, Italy
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- TeaM Sual Corporation - Philippines
- Indonesian Coal Mining Association
- Central Java Power - Indonesia
- Bharathi Cement Corporation - India
- Africa Commodities Group - South Africa
- Renaissance Capital - South Africa
- Leighton Contractors Pty Ltd - Australia
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
- Edison Trading Spa - Italy
- Borneo Indobara - Indonesia
- Pendopo Energi Batubara - Indonesia
- Central Electricity Authority - India
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Lanco Infratech Ltd - India
- Simpson Spence & Young - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Merrill Lynch Commodities Europe
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Bulk Trading Sa - Switzerland
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Rio Tinto Coal - Australia
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- IEA Clean Coal Centre - UK
- Samtan Co., Ltd - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- The State Trading Corporation of India Ltd
- Semirara Mining Corp, Philippines
- Kepco SPC Power Corporation, Philippines
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