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