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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 $75/bbl over the next few years.
I do, however, believe it is beyond the ability of men to predict the exact shape of the swing cycle, in terms of the period and cycle frequency.
Source: The Jakarta Post
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The writer has been working in the oil and gas business for about 30 years.
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Thursday, 05 March 15
BUKIT ASAM BOOKED US$ 1 BILLION REVENUE IN 2014
COALspot.com: Indonesian publicly listed and state owned coal miner PT. Bukit Asam, has announced that, the revenue of the company for the period J ...
Wednesday, 04 March 15
AN AGENDA FOR CHANGE - FITCH INDONESIA CONFERENCE
Fitch Indonesia Conference - 5 March 2015
Fitch Ratings will host its annual Indonesia conference on 5 March 2015.
The theme of this year ...
Wednesday, 04 March 15
KEEP CALM AND INVEST IN DRY - THEODORE NTALAKOS
Keep Calm and Carry On was originally a motivational poster, intended to raise the morale of the British public, produced by the British government ...
Tuesday, 03 March 15
INDONESIAN COAL EXPORT VOLUME TO DECLINE 50% BY 2019
COALspot.com: The Indonesian government is planning to reduce coal export volume by 50% within the next five years while keeping its coal productio ...
Tuesday, 03 March 15
INDIAN THERMAL COAL IMPORTS: STEAMING FORWARD - CLARKSONS
Coal-fired power stations comprise around 60% of India’s power output, and with domestic supply issues and favourable international coal pric ...
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- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Globalindo Alam Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Mercuria Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Jindal Steel & Power Ltd - India
- Indian Energy Exchange, India
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- Indo Tambangraya Megah - Indonesia
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Trasteel International SA, Italy
- IHS Mccloskey Coal Group - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Energy Development Corp, Philippines
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Commonwealth Bank - Australia
- GVK Power & Infra Limited - India
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
- Bangladesh Power Developement Board
- Uttam Galva Steels Limited - India
- Wilmar Investment Holdings
- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Planning Commission, India
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Medco Energi Mining Internasional
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Sarangani Energy Corporation, Philippines
- MS Steel International - UAE
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
- Parliament of New Zealand
- Sinarmas Energy and Mining - Indonesia
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Marubeni Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Heidelberg Cement - Germany
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- White Energy Company Limited
- Siam City Cement PLC, Thailand
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- Kaltim Prima Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- San Jose City I Power Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- Meenaskhi Energy Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Sidhee Cement - India
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- The State Trading Corporation of India Ltd
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- Electricity Generating Authority of Thailand
- Vedanta Resources Plc - India
- Minerals Council of Australia
- Agrawal Coal Company - India
- Binh Thuan Hamico - Vietnam
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Maharashtra Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Madhucon Powers Ltd - India
- International Coal Ventures Pvt Ltd - India
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- London Commodity Brokers - England
- Deloitte Consulting - India
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Latin American Coal - Colombia
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Merrill Lynch Commodities Europe
- Interocean Group of Companies - India
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Samtan Co., Ltd - South Korea
- PowerSource Philippines DevCo
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- Bayan Resources Tbk. - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Salva Resources Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Ind-Barath Power Infra Limited - India
- GMR Energy Limited - India
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Chamber of Mines of South Africa
- Mjunction Services Limited - India
- SMG Consultants - Indonesia
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
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