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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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Friday, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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Showing 41 to 45 news of total 6871 |
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- SMC Global Power, Philippines
- Wood Mackenzie - Singapore
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Rio Tinto Coal - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- Electricity Generating Authority of Thailand
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Indogreen Group - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Lanco Infratech Ltd - India
- Petron Corporation, Philippines
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Parliament of New Zealand
- Kepco SPC Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Xindia Steels Limited - India
- Central Java Power - Indonesia
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- VISA Power Limited - India
- Edison Trading Spa - Italy
- Posco Energy - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Indika Energy - Indonesia
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Minerals Council of Australia
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- Tamil Nadu electricity Board
- The University of Queensland
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- AsiaOL BioFuels Corp., Philippines
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Iligan Light & Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Parry Sugars Refinery, India
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Manunggal Multi Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Price Waterhouse Coopers - Russia
- CNBM International Corporation - China
- Madhucon Powers Ltd - India
- Jindal Steel & Power Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Independent Power Producers Association of India
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Australian Coal Association
- PetroVietnam Power Coal Import and Supply Company
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- Uttam Galva Steels Limited - India
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- Rashtriya Ispat Nigam Limited - India
- Pendopo Energi Batubara - Indonesia
- Sree Jayajothi Cements Limited - India
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Heidelberg Cement - Germany
- Mercator Lines Limited - India
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Orica Mining Services - Indonesia
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bharathi Cement Corporation - India
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Bulk Trading Sa - Switzerland
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Latin American Coal - Colombia
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- SMG Consultants - Indonesia
- Ceylon Electricity Board - Sri Lanka
- CIMB Investment Bank - Malaysia
- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- Baramulti Group, Indonesia
- Antam Resourcindo - Indonesia
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- Pipit Mutiara Jaya. PT, Indonesia
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- Power Finance Corporation Ltd., India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- White Energy Company Limited
- ASAPP Information Group - India
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Planning Commission, India
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Global Coal Blending Company Limited - Australia
- Bhatia International Limited - India
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- Larsen & Toubro Limited - India
- Merrill Lynch Commodities Europe
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Global Green Power PLC Corporation, Philippines
- London Commodity Brokers - England
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