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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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Tuesday, 03 March 15
Q4' FOB INDONESIA COAL SWAP CLOSED 2% LOWER COMPARED TO Q2 CLOSING PRICE OF $ 47.47
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose month on month and declined week over week.
The Q2 swap increased US$ 2.24 ...
Tuesday, 03 March 15
FOB RICHARDS BAY COAL SWAPS: Q2 UP 9.60%; Q3 UP 9.75% W-O-W
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and week on week.
The Q2 swap has soared US$ 5 ...
Monday, 02 March 15
CFR SOUTH CHINA COAL SWAP FOR Q2 DELIVERY REACHED $ 57.50 PMT W/E 27 FEB 2015
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 1.37 (+2.44%) per MT month over month and declined US$ 0.42 ...
Monday, 02 March 15
BORYEONG POWER PLANT OF KOMIPO TO IMPORT 140K OF SUB-BITUMINOUS COAL FOR Q2
COALspot.com - Korea Midland Power Co. Ltd. (KOMIPO) is inviting bids from coal producers, marketing companies, or traders to supply of 140,000 (70 ...
Monday, 02 March 15
FOB NEWCASTLE COAL SWAP ROSE 6.89% MONTH OVER MONTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 3.35 per MT (+6.89%) month over month and US$ 0.40 (0.78%) week on ...
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- Australian Commodity Traders Exchange
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Sindya Power Generating Company Private Ltd
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Kapuas Tunggal Persada - Indonesia
- Salva Resources Pvt Ltd - India
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Grasim Industreis Ltd - India
- IEA Clean Coal Centre - UK
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- CNBM International Corporation - China
- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Wilmar Investment Holdings
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- Thiess Contractors Indonesia
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Bhatia International Limited - India
- Semirara Mining Corp, Philippines
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Mercator Lines Limited - India
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Sojitz Corporation - Japan
- Bhushan Steel Limited - India
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Globalindo Alam Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Interocean Group of Companies - India
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- Bharathi Cement Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Formosa Plastics Group - Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Maheswari Brothers Coal Limited - India
- Kumho Petrochemical, South Korea
- Thai Mozambique Logistica
- Posco Energy - South Korea
- Wood Mackenzie - Singapore
- Rashtriya Ispat Nigam Limited - India
- Commonwealth Bank - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- The State Trading Corporation of India Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PowerSource Philippines DevCo
- White Energy Company Limited
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Romanian Commodities Exchange
- Alfred C Toepfer International GmbH - Germany
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Anglo American - United Kingdom
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Sakthi Sugars Limited - India
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Mercuria Energy - Indonesia
- PTC India Limited - India
- McConnell Dowell - Australia
- Australian Coal Association
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Attock Cement Pakistan Limited
- Altura Mining Limited, Indonesia
- The University of Queensland
- Eastern Energy - Thailand
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Kepco SPC Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- Cigading International Bulk Terminal - Indonesia
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Kaltim Prima Coal - Indonesia
- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Coalindo Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- Indian Energy Exchange, India
- Indika Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- Singapore Mercantile Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- International Coal Ventures Pvt Ltd - India
- India Bulls Power Limited - India
- Mintek Dendrill Indonesia
- Parliament of New Zealand
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Larsen & Toubro Limited - India
- Siam City Cement PLC, Thailand
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Georgia Ports Authority, United States
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Bayan Resources Tbk. - Indonesia
- Medco Energi Mining Internasional
- Straits Asia Resources Limited - Singapore
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Global Business Power Corporation, Philippines
- ICICI Bank Limited - India
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Port Waratah Coal Services - Australia
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Ministry of Finance - Indonesia
- Bhoruka Overseas - Indonesia
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Ind-Barath Power Infra Limited - India
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