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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, 27 January 15
Q1 FOB INDONESIA COAL SWAP CLOSED AT $ 47.87 FOR WEEK ENDING JAN. 23
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 gain week over week and declined month on month.
The Q1 swap has decline US$ 0.9 ...
Tuesday, 27 January 15
Q2 FOB NEWCASTLE COAL SWAP UP 4.5% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery declined US$ 0.28 per MT (-0.54%) month over month and increased US$ 1.23 ( ...
Monday, 26 January 15
OVERSUPPLY, AMPLE STOCKPILES, AND LACKLUSTER UNDERLYING STEEL DEMAND KEPT COKING COAL PRICES LOW IN 2014
COALspot.com: Coking coal prices (FOB & CFR) fell 15% and 18% respectively during the year, amidst persistent oversupply, ample inventory and s ...
Monday, 26 January 15
FOB RICHARDS BAY Q2 COAL SWAP CLOSED LOWER THAN Q1 CLOSING
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q1' 2015 declined month over month and day on day.
The Q1 swap has fell ...
Monday, 26 January 15
API 8 CFR SOUTH CHINA COAL SWAP CONTINUE TO SLIDE M-O-M; ROSE W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery declined US$ 0.79 (-1.33%) per MT month over month and gained US$ 2.10&nb ...
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- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Meralco Power Generation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Aditya Birla Group - India
- Holcim Trading Pte Ltd - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- Planning Commission, India
- The Treasury - Australian Government
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- India Bulls Power Limited - India
- Bhoruka Overseas - Indonesia
- Indogreen Group - Indonesia
- Economic Council, Georgia
- Tamil Nadu electricity Board
- Semirara Mining Corp, Philippines
- Mjunction Services Limited - India
- Parliament of New Zealand
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Trasteel International SA, Italy
- IHS Mccloskey Coal Group - USA
- Kumho Petrochemical, South Korea
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Goldman Sachs - Singapore
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Minerals Council of Australia
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- Chettinad Cement Corporation Ltd - India
- Lanco Infratech Ltd - India
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Timah Investasi Mineral - Indoneisa
- SMC Global Power, Philippines
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- Attock Cement Pakistan Limited
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Sarangani Energy Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Independent Power Producers Association of India
- Global Coal Blending Company Limited - Australia
- Globalindo Alam Lestari - Indonesia
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- New Zealand Coal & Carbon
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Agrawal Coal Company - India
- The University of Queensland
- Ministry of Transport, Egypt
- Carbofer General Trading SA - India
- Gujarat Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- PowerSource Philippines DevCo
- Global Green Power PLC Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Formosa Plastics Group - Taiwan
- Interocean Group of Companies - India
- Kapuas Tunggal Persada - Indonesia
- PTC India Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- Australian Coal Association
- Wood Mackenzie - Singapore
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Energy Link Ltd, New Zealand
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- Essar Steel Hazira Ltd - India
- Antam Resourcindo - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Central Electricity Authority - India
- Mercator Lines Limited - India
- Jaiprakash Power Ventures ltd
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Romanian Commodities Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- Parry Sugars Refinery, India
- Bharathi Cement Corporation - India
- Petron Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Mintek Dendrill Indonesia
- Aboitiz Power Corporation - Philippines
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- Kepco SPC Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Central Java Power - Indonesia
- Xindia Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- Samtan Co., Ltd - South Korea
- European Bulk Services B.V. - Netherlands
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