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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, 25 February 15
PORT OF NEWCASTLE SHIPPED 13.16MT OF COAL IN JANUARY; DECLINED 16.70% FROM A MONTH AGO
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1.15 billio ...
Wednesday, 25 February 15
BDI SLIPPING ONCE MORE TO FRESH HISTORICAL LOWS
COALspot.com: With the BDI slipping once more to fresh historical lows and the Chinese holidays underway, signs for a positive reversal in the Dry ...
Tuesday, 24 February 15
FOB INDONESIA COAL SWAP SET TO RALLY
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose week over week and month on month.
The Q2 swap increased US$ 3.30 (+7.30%) ...
Tuesday, 24 February 15
Q3' FOB RICHARDS BAY COAL SWAP CLOSED $59.80 W/E 20 FEB
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and decline week on week.
The Q2 swap has soar ...
Tuesday, 24 February 15
IHS ENERGY COAL CONFERENCE OF THE AMERICAS
Attend the IHS Energy Coal Conference of the Americas 17-19 March in Cartagena, Colombia and learn about timely concerns in today's coal indust ...
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- The University of Queensland
- Coal and Oil Company - UAE
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- CNBM International Corporation - China
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- Aboitiz Power Corporation - Philippines
- Ministry of Finance - Indonesia
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Singapore Mercantile Exchange
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indian Oil Corporation Limited
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- Electricity Authority, New Zealand
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- Global Coal Blending Company Limited - Australia
- Gujarat Mineral Development Corp Ltd - India
- Uttam Galva Steels Limited - India
- Mintek Dendrill Indonesia
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Sojitz Corporation - Japan
- VISA Power Limited - India
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Larsen & Toubro Limited - India
- GMR Energy Limited - India
- Indika Energy - Indonesia
- Tamil Nadu electricity Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- IHS Mccloskey Coal Group - USA
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Manunggal Multi Energi - Indonesia
- GVK Power & Infra Limited - India
- Agrawal Coal Company - India
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Semirara Mining and Power Corporation, Philippines
- Indian Energy Exchange, India
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- OPG Power Generation Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- London Commodity Brokers - England
- Star Paper Mills Limited - India
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
- Orica Mining Services - Indonesia
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Electricity Generating Authority of Thailand
- Petron Corporation, Philippines
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- SMC Global Power, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- Mercator Lines Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- McConnell Dowell - Australia
- Power Finance Corporation Ltd., India
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Altura Mining Limited, Indonesia
- CIMB Investment Bank - Malaysia
- Antam Resourcindo - Indonesia
- Iligan Light & Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Krishnapatnam Port Company Ltd. - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Directorate Of Revenue Intelligence - India
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- Oldendorff Carriers - Singapore
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- Mjunction Services Limited - India
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Cigading International Bulk Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Rio Tinto Coal - Australia
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- Bulk Trading Sa - Switzerland
- Interocean Group of Companies - India
- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Parliament of New Zealand
- Bhushan Steel Limited - India
- Grasim Industreis Ltd - India
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- Globalindo Alam Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- ICICI Bank Limited - India
- Holcim Trading Pte Ltd - Singapore
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- Essar Steel Hazira Ltd - India
- New Zealand Coal & Carbon
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- PNOC Exploration Corporation - Philippines
- Orica Australia Pty. Ltd.
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Petrochimia International Co. Ltd.- Taiwan
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
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