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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, 11 March 15
RICHARDS BAY COAL SWAPS DROP $ 3.65 - 4.0/T W-O-W
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 fell US$ ...
Wednesday, 11 March 15
DRY BULK MARKET CLOSED OFF ON THE GREEN FOR A SECOND WEEK IN A ROW - INTERMODAL
COALspot.com: The Dry Bulk market closed off on the green for a second week in a row, while the performance of Capesizes hindered a more substantia ...
Wednesday, 11 March 15
MARKET INSIGHT : NEWBUILDINGS - PANOS TSILINGIRIS
From a cost-based, buy-low perspective, there is currently a buying opportunity in the second-hand dry bulk market. I am an anti-cyclical (buy-low) ...
Wednesday, 11 March 15
DRY BULK MARKET: ALL IS NOT LOST FOR A RECOVERY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The low cost of commodities across the board could trigger an increase of trade among many countries, which in turn could lead to a recovery of the ...
Wednesday, 11 March 15
U.S. ELECTRIC GENERATING COMPANIES TO ADD MORE THAN 20 GW OF GENERATING CAPACITY IN 2015; 16 GW OF GENERATING CAPACITY IS EXPECTED TO RETIRE IN 2015
COALspot.com: In 2015, electric generating companies in U.S. expect to add more than 20 gigawatts (GW) of utility-scale generating capacity to the ...
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- Indian Energy Exchange, India
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Central Java Power - Indonesia
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Aditya Birla Group - India
- CIMB Investment Bank - Malaysia
- Aboitiz Power Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Bhoruka Overseas - Indonesia
- White Energy Company Limited
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Ambuja Cements Ltd - India
- Borneo Indobara - Indonesia
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- Indian Oil Corporation Limited
- Bhatia International Limited - India
- Jaiprakash Power Ventures ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- Lanco Infratech Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Sakthi Sugars Limited - India
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Mjunction Services Limited - India
- Essar Steel Hazira Ltd - India
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- Africa Commodities Group - South Africa
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- New Zealand Coal & Carbon
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Coalindo Energy - Indonesia
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Bulk Trading Sa - Switzerland
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Samtan Co., Ltd - South Korea
- Energy Development Corp, Philippines
- Standard Chartered Bank - UAE
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- GVK Power & Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- Economic Council, Georgia
- Gujarat Mineral Development Corp Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- The State Trading Corporation of India Ltd
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Mintek Dendrill Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Rashtriya Ispat Nigam Limited - India
- Meenaskhi Energy Private Limited - India
- Maheswari Brothers Coal Limited - India
- SN Aboitiz Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Videocon Industries ltd - India
- Gujarat Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Kobexindo Tractors - Indoneisa
- Electricity Authority, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- VISA Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Posco Energy - South Korea
- Global Business Power Corporation, Philippines
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Salva Resources Pvt Ltd - India
- Minerals Council of Australia
- Vedanta Resources Plc - India
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GAC Shipping (India) Pvt Ltd
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Antam Resourcindo - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- Thai Mozambique Logistica
- ICICI Bank Limited - India
- South Luzon Thermal Energy Corporation
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- Formosa Plastics Group - Taiwan
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Star Paper Mills Limited - India
- Deloitte Consulting - India
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Orica Australia Pty. Ltd.
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- Independent Power Producers Association of India
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- Parliament of New Zealand
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- Mercuria Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Australian Coal Association
- Interocean Group of Companies - India
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- Power Finance Corporation Ltd., India
- Timah Investasi Mineral - Indoneisa
- Ministry of Transport, Egypt
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