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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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Friday, 13 March 15
U.S. COAL PRODUCTION UP 2.3% WEEK OVER WEEK
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.5 million short tons (mmst) of coal ...
Friday, 13 March 15
ADARO RECORDED A 7% INCREASE IN EBITDA OF $877 MILLION IN 2014
“Coal market continues to be difficult and challenging” – Adaro Energy
The world’s Top 5 thermal coal exporter, ...
Thursday, 12 March 15
CAPESIZE : ACTIVITY IS LOW; PANAMAX: BIT MORE ACTIVITY; HANDY: A FIRMING WEEK
Handy
It has been a firming week in both hemispheres this week and especially in the Pacific, says Fearnleys AS in its week's week report.
...
Thursday, 12 March 15
COAL MINERS REMAIN UNDER PRESSURE AS GLUT CONTINUES - THE JAKARTA POST
Indonesia’s major coal miners reported a significant drop in their earnings last year as the sharp drop in the global demand, mainly from Chi ...
Thursday, 12 March 15
FOB INDONESIA COAL SWAP DROP TO $47.33 A TON IN THE WEEK ENDED MAR.6
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 0.37 (0.78%) month ...
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- Cigading International Bulk Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- Independent Power Producers Association of India
- Riau Bara Harum - Indonesia
- Renaissance Capital - South Africa
- Therma Luzon, Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Rio Tinto Coal - Australia
- Uttam Galva Steels Limited - India
- Singapore Mercantile Exchange
- GVK Power & Infra Limited - India
- San Jose City I Power Corp, Philippines
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- Bhushan Steel Limited - India
- GMR Energy Limited - India
- Carbofer General Trading SA - India
- Tamil Nadu electricity Board
- Meenaskhi Energy Private Limited - India
- Simpson Spence & Young - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vizag Seaport Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Manunggal Multi Energi - Indonesia
- Eastern Energy - Thailand
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- Kartika Selabumi Mining - Indonesia
- Africa Commodities Group - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jaiprakash Power Ventures ltd
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Banpu Public Company Limited - Thailand
- Gujarat Sidhee Cement - India
- Holcim Trading Pte Ltd - Singapore
- Salva Resources Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- Goldman Sachs - Singapore
- Indo Tambangraya Megah - Indonesia
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- Samtan Co., Ltd - South Korea
- Alfred C Toepfer International GmbH - Germany
- SMC Global Power, Philippines
- Sree Jayajothi Cements Limited - India
- Kobexindo Tractors - Indoneisa
- White Energy Company Limited
- Indika Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- PNOC Exploration Corporation - Philippines
- Agrawal Coal Company - India
- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
- Vedanta Resources Plc - India
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- Posco Energy - South Korea
- The Treasury - Australian Government
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- Antam Resourcindo - Indonesia
- The University of Queensland
- Thiess Contractors Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Standard Chartered Bank - UAE
- Altura Mining Limited, Indonesia
- CIMB Investment Bank - Malaysia
- Leighton Contractors Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Ministry of Mines - Canada
- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Chamber of Mines of South Africa
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- Orica Mining Services - Indonesia
- Interocean Group of Companies - India
- ICICI Bank Limited - India
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- Bhatia International Limited - India
- McConnell Dowell - Australia
- Xindia Steels Limited - India
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Binh Thuan Hamico - Vietnam
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Parry Sugars Refinery, India
- Siam City Cement - Thailand
- Coal and Oil Company - UAE
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Makarim & Taira - Indonesia
- Power Finance Corporation Ltd., India
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Coastal Gujarat Power Limited - India
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- VISA Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Indian Oil Corporation Limited
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Kepco SPC Power Corporation, Philippines
- Minerals Council of Australia
- Toyota Tsusho Corporation, Japan
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- PTC India Limited - India
- Wilmar Investment Holdings
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Intertek Mineral Services - Indonesia
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Global Green Power PLC Corporation, Philippines
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Heidelberg Cement - Germany
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Electricity Authority, New Zealand
- TeaM Sual Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
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