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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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- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Heidelberg Cement - Germany
- MS Steel International - UAE
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- VISA Power Limited - India
- Planning Commission, India
- Intertek Mineral Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- Ambuja Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- PTC India Limited - India
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Energy Development Corp, Philippines
- Ministry of Mines - Canada
- Eastern Energy - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Makarim & Taira - Indonesia
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Australian Commodity Traders Exchange
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Borneo Indobara - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Metalloyd Limited - United Kingdom
- Economic Council, Georgia
- Electricity Authority, New Zealand
- Orica Australia Pty. Ltd.
- Australian Coal Association
- Mintek Dendrill Indonesia
- Salva Resources Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Videocon Industries ltd - India
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- Interocean Group of Companies - India
- Essar Steel Hazira Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- Uttam Galva Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Vijayanagar Sugar Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Chamber of Mines of South Africa
- Tamil Nadu electricity Board
- Lanco Infratech Ltd - India
- Timah Investasi Mineral - Indoneisa
- Barasentosa Lestari - Indonesia
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- ICICI Bank Limited - India
- Tata Chemicals Ltd - India
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- Jorong Barutama Greston.PT - Indonesia
- Orica Mining Services - Indonesia
- Siam City Cement PLC, Thailand
- Formosa Plastics Group - Taiwan
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Energy Link Ltd, New Zealand
- Carbofer General Trading SA - India
- India Bulls Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Sakthi Sugars Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- SN Aboitiz Power Inc, Philippines
- Malabar Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Indika Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Minerals Council of Australia
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- Merrill Lynch Commodities Europe
- White Energy Company Limited
- International Coal Ventures Pvt Ltd - India
- Mercator Lines Limited - India
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Indonesian Coal Mining Association
- Samtan Co., Ltd - South Korea
- Bhushan Steel Limited - India
- Mercuria Energy - Indonesia
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Indian Energy Exchange, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- The Treasury - Australian Government
- Price Waterhouse Coopers - Russia
- Thiess Contractors Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Georgia Ports Authority, United States
- Oldendorff Carriers - Singapore
- Coastal Gujarat Power Limited - India
- Renaissance Capital - South Africa
- Bhoruka Overseas - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- Krishnapatnam Port Company Ltd. - India
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- SMG Consultants - Indonesia
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- Sical Logistics Limited - India
- Mjunction Services Limited - India
- Sindya Power Generating Company Private Ltd
- Independent Power Producers Association of India
- Parry Sugars Refinery, India
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- Vedanta Resources Plc - India
- Parliament of New Zealand
- Billiton Holdings Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Coal Blending Company Limited - Australia
- Holcim Trading Pte Ltd - Singapore
- CIMB Investment Bank - Malaysia
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