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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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Showing 3166 to 3170 news of total 6871 |
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- Tamil Nadu electricity Board
- Deloitte Consulting - India
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- CIMB Investment Bank - Malaysia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Sidhee Cement - India
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Rio Tinto Coal - Australia
- Simpson Spence & Young - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Eastern Energy - Thailand
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Minerals Council of Australia
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Semirara Mining and Power Corporation, Philippines
- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement - Thailand
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- Chamber of Mines of South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Agrawal Coal Company - India
- Kumho Petrochemical, South Korea
- Sree Jayajothi Cements Limited - India
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- PTC India Limited - India
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- GMR Energy Limited - India
- Marubeni Corporation - India
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Binh Thuan Hamico - Vietnam
- Malabar Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Ceylon Electricity Board - Sri Lanka
- Straits Asia Resources Limited - Singapore
- Ministry of Transport, Egypt
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Goldman Sachs - Singapore
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Economic Council, Georgia
- Riau Bara Harum - Indonesia
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Latin American Coal - Colombia
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Edison Trading Spa - Italy
- Australian Commodity Traders Exchange
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Kaltim Prima Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Grasim Industreis Ltd - India
- Bulk Trading Sa - Switzerland
- McConnell Dowell - Australia
- Maheswari Brothers Coal Limited - India
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- Jaiprakash Power Ventures ltd
- GN Power Mariveles Coal Plant, Philippines
- Medco Energi Mining Internasional
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- Banpu Public Company Limited - Thailand
- New Zealand Coal & Carbon
- Formosa Plastics Group - Taiwan
- Pendopo Energi Batubara - Indonesia
- Planning Commission, India
- Mercator Lines Limited - India
- Georgia Ports Authority, United States
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Aboitiz Power Corporation - Philippines
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- Wood Mackenzie - Singapore
- Bhushan Steel Limited - India
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Kohat Cement Company Ltd. - Pakistan
- Thiess Contractors Indonesia
- Ambuja Cements Ltd - India
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Energy Development Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Borneo Indobara - Indonesia
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- Energy Link Ltd, New Zealand
- Barasentosa Lestari - Indonesia
- Petron Corporation, Philippines
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Orica Australia Pty. Ltd.
- Orica Mining Services - Indonesia
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