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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 $75/bbl over the next few years.
I do, however, believe it is beyond the ability of men to predict the exact shape of the swing cycle, in terms of the period and cycle frequency.
Source: The Jakarta Post
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The writer has been working in the oil and gas business for about 30 years.
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Wednesday, 18 March 15
Q2 INDONESIAN COAL SWAP DROP 1.45% M-O-M; GAIN 0.63% W-O-W
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and gained week over week.
The Q2 swap fell US$ 0.70 (1.45%) ...
Tuesday, 17 March 15
GAS TO CHALLENGE COAL IN THE ASIAN POWER GENERATION MIX - WOOD MACKENZIE
KNOWLEDGE TO ELEVATE
Wood Mackenzie says that coal is facing increasing competition from gas in the power sector. Coal has dominated as the fu ...
Tuesday, 17 March 15
RIO TINTO PAID US$ 7.1 BILLION IN TAXES IN 2014
COALspot.com: Rio Tinto has published its latest Taxes paid report, detailing the US$7.1 billion in taxes paid by the company around the world in 2 ...
Tuesday, 17 March 15
NEARLY 17% OF US COAL PRODUCTION UNECONOMIC AT CURRENT MARKET PRICING - WOOD MACKENZIE
COALspot.com: Close to 17% of forecast 2015 US coal production is at risk of idling or closure, totalling 162 million short tons (Mst), as these mi ...
Tuesday, 17 March 15
Q3' SA COAL SWAP CLOSED $57.30 PMT W/E 13 MARCH
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and gained week on week.
The Q2 swap has fe ...
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- Posco Energy - South Korea
- Energy Development Corp, Philippines
- Planning Commission, India
- Riau Bara Harum - Indonesia
- Dalmia Cement Bharat India
- Kaltim Prima Coal - Indonesia
- Aditya Birla Group - India
- Minerals Council of Australia
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Sical Logistics Limited - India
- Energy Link Ltd, New Zealand
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- Oldendorff Carriers - Singapore
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- Salva Resources Pvt Ltd - India
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Romanian Commodities Exchange
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Orica Mining Services - Indonesia
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Wilmar Investment Holdings
- Gujarat Sidhee Cement - India
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- Sojitz Corporation - Japan
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Indian Oil Corporation Limited
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- LBH Netherlands Bv - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Borneo Indobara - Indonesia
- Mercuria Energy - Indonesia
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Latin American Coal - Colombia
- Kepco SPC Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- Meenaskhi Energy Private Limited - India
- Tata Chemicals Ltd - India
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- Agrawal Coal Company - India
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- Iligan Light & Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- AsiaOL BioFuels Corp., Philippines
- Xindia Steels Limited - India
- Georgia Ports Authority, United States
- Africa Commodities Group - South Africa
- CNBM International Corporation - China
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
- TeaM Sual Corporation - Philippines
- Orica Australia Pty. Ltd.
- Ceylon Electricity Board - Sri Lanka
- Australian Coal Association
- Grasim Industreis Ltd - India
- Ministry of Mines - Canada
- London Commodity Brokers - England
- PTC India Limited - India
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
- Attock Cement Pakistan Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Essar Steel Hazira Ltd - India
- Renaissance Capital - South Africa
- OPG Power Generation Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Indika Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coalindo Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Central Electricity Authority - India
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Semirara Mining Corp, Philippines
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Bukit Baiduri Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- MS Steel International - UAE
- Economic Council, Georgia
- The Treasury - Australian Government
- ASAPP Information Group - India
- Independent Power Producers Association of India
- Leighton Contractors Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- PowerSource Philippines DevCo
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Vedanta Resources Plc - India
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- IHS Mccloskey Coal Group - USA
- Directorate Of Revenue Intelligence - India
- Bhoruka Overseas - Indonesia
- Savvy Resources Ltd - HongKong
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- Indian Energy Exchange, India
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Miang Besar Coal Terminal - Indonesia
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Billiton Holdings Pty Ltd - Australia
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Siam City Cement - Thailand
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Kobexindo Tractors - Indoneisa
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Global Green Power PLC Corporation, Philippines
- Coal and Oil Company - UAE
- Anglo American - United Kingdom
- Parry Sugars Refinery, India
- White Energy Company Limited
- Marubeni Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Merrill Lynch Commodities Europe
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
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