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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, 19 February 15
PANAMAX: NOPAC AND AUSSIE ROUNDS ARE DONE IN LOW/MID $ 4000; TRIPS VIA INDONESIA TO INDIA CLOSER TO THE $5000 MARK - FEARNLEYS
Handy
The handy and supra market has not seen any firming rates in front of the Chinese New Year and still suffering on low activity in both hemi ...
Wednesday, 18 February 15
DRY BULK SHIPPING TO RECOVER IN LATE 2015 - DREWRY MARITIME RESEARCH
Strong trade growth, moderating fleet development and deployment of new fuel efficient vessels are expected to lead to a recovery in dry bulk shipp ...
Tuesday, 17 February 15
WHO PAYS THE SUEZ CANAL FEES? - INCE & CO
KNOWLEDGE TO ELEVATE
This was an appeal from an arbitration award on a point of construction in relation to the wording of an addendum to a ch ...
Tuesday, 17 February 15
BUOYANT WAVES IN RECENT YEARS: GLOBAL SHIP INVESTMENT SINCE THE CRASH - HELLENIC SHIPPING NEWS
Anxiety about fleet expansion is a recurring feature of world shipping markets. Within the global maritime community, worries about the vast amount ...
Tuesday, 17 February 15
FOB SUB-BIT INDONESIA COAL SWAP UP 8% MONTH OVER MONTH
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose week over week and month on month.
The Q2 swap up US$ 3.58 (+8.00%) month o ...
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Showing 3186 to 3190 news of total 6871 |
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- Africa Commodities Group - South Africa
- Dalmia Cement Bharat India
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chamber of Mines of South Africa
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Kideco Jaya Agung - Indonesia
- Indogreen Group - Indonesia
- Kumho Petrochemical, South Korea
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- Rio Tinto Coal - Australia
- CNBM International Corporation - China
- GMR Energy Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- SMC Global Power, Philippines
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Billiton Holdings Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- Cigading International Bulk Terminal - Indonesia
- Vedanta Resources Plc - India
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate Of Revenue Intelligence - India
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Videocon Industries ltd - India
- Australian Coal Association
- Aditya Birla Group - India
- Makarim & Taira - Indonesia
- Riau Bara Harum - Indonesia
- Oldendorff Carriers - Singapore
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- IHS Mccloskey Coal Group - USA
- Timah Investasi Mineral - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Carbofer General Trading SA - India
- Ministry of Finance - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Independent Power Producers Association of India
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- European Bulk Services B.V. - Netherlands
- Leighton Contractors Pty Ltd - Australia
- The Treasury - Australian Government
- Ministry of Mines - Canada
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Transport, Egypt
- Krishnapatnam Port Company Ltd. - India
- Mercator Lines Limited - India
- Madhucon Powers Ltd - India
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- Bangladesh Power Developement Board
- The University of Queensland
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Planning Commission, India
- Sical Logistics Limited - India
- Banpu Public Company Limited - Thailand
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- GN Power Mariveles Coal Plant, Philippines
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- Barasentosa Lestari - Indonesia
- Commonwealth Bank - Australia
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sindya Power Generating Company Private Ltd
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mercuria Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- Grasim Industreis Ltd - India
- Global Business Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Borneo Indobara - Indonesia
- Power Finance Corporation Ltd., India
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Larsen & Toubro Limited - India
- Coastal Gujarat Power Limited - India
- VISA Power Limited - India
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- ASAPP Information Group - India
- New Zealand Coal & Carbon
- Meralco Power Generation, Philippines
- PNOC Exploration Corporation - Philippines
- Medco Energi Mining Internasional
- McConnell Dowell - Australia
- Straits Asia Resources Limited - Singapore
- Orica Australia Pty. Ltd.
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Meenaskhi Energy Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- SMG Consultants - Indonesia
- Eastern Energy - Thailand
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Maheswari Brothers Coal Limited - India
- Indonesian Coal Mining Association
- Asmin Koalindo Tuhup - Indonesia
- Sojitz Corporation - Japan
- Port Waratah Coal Services - Australia
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
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