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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 $75/bbl over the next few years.
I do, however, believe it is beyond the ability of men to predict the exact shape of the swing cycle, in terms of the period and cycle frequency.
Source: The Jakarta Post
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The writer has been working in the oil and gas business for about 30 years.
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Monday, 16 March 15
MAKING THE WORLD GO ROUND - SEABORNE TRADE! - CLARKSONS
Money, or even love if you prefer, are claimed to make the world go round. For the shipping world, however, it’s trade that sets things spinn ...
Monday, 16 March 15
API 5 FOB NEWCASTLE COAL SWAPS: DECLINED
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 2.48 per MT (-4.77%) month over month and US$ 0.93 (-1.84%) we ...
Monday, 16 March 15
CFR SOUTH CHINA THERMAL COAL SWAP DECLINED 3.74% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 2.17 (-3.74%) per MT month over month and US$ 0.67 (-1 ...
Sunday, 15 March 15
BDI DECLINED LESSER THAN 1% WEEK OVER WEEK; INDO-INDIA FIRM
COALspot.com: The most of indices, including bulk dry index were falling this week. The BDI has been down by just 0.53 points and closing at 562 po ...
Saturday, 14 March 15
CAPESIZE DRY BULKERS TO AVERAGE BETWEEN $3,000 AND $9,000/DAY IN THE COMING WEEKS SAYS BIMCO
BIMCO issued its latest short-term estimates for the dry bulk market. For March/May: BIMCO assesses that the Capesize time charter (T/C) average ra ...
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- Renaissance Capital - South Africa
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- Mercuria Energy - Indonesia
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Romanian Commodities Exchange
- Bukit Baiduri Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- Indian Energy Exchange, India
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- GMR Energy Limited - India
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- Xindia Steels Limited - India
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- Maheswari Brothers Coal Limited - India
- PNOC Exploration Corporation - Philippines
- Posco Energy - South Korea
- Port Waratah Coal Services - Australia
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- Marubeni Corporation - India
- Samtan Co., Ltd - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sindya Power Generating Company Private Ltd
- Latin American Coal - Colombia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Bhushan Steel Limited - India
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coal and Oil Company - UAE
- Bharathi Cement Corporation - India
- White Energy Company Limited
- VISA Power Limited - India
- Oldendorff Carriers - Singapore
- Tamil Nadu electricity Board
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- Pendopo Energi Batubara - Indonesia
- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Orica Mining Services - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Barasentosa Lestari - Indonesia
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Central Java Power - Indonesia
- Salva Resources Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Tata Chemicals Ltd - India
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Globalindo Alam Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Aditya Birla Group - India
- Mercator Lines Limited - India
- Dalmia Cement Bharat India
- PowerSource Philippines DevCo
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Parry Sugars Refinery, India
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- PTC India Limited - India
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Ministry of Transport, Egypt
- The State Trading Corporation of India Ltd
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- Australian Commodity Traders Exchange
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Interocean Group of Companies - India
- CNBM International Corporation - China
- Thai Mozambique Logistica
- Bukit Makmur.PT - Indonesia
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
- PetroVietnam Power Coal Import and Supply Company
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- LBH Netherlands Bv - Netherlands
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- Trasteel International SA, Italy
- Bhoruka Overseas - Indonesia
- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Generating Authority of Thailand
- London Commodity Brokers - England
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- Formosa Plastics Group - Taiwan
- Baramulti Group, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Heidelberg Cement - Germany
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- Economic Council, Georgia
- Sakthi Sugars Limited - India
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Kaltim Prima Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- Indonesian Coal Mining Association
- Karaikal Port Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Wood Mackenzie - Singapore
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
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