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Wednesday, 08 October 14
OIL COULD FALL TO USD80 BEFORE SHALE SUPPLY RESPONSE - FITCH
 COALspot.com: Brent oil could fall as low as USD80 a barrel before triggering a self-correcting supply response with shale-oil drillers cutting investment in new wells, Fitch Ratings says.
According to Fitch, the steep rate at which production from shale wells declines mean companies have to keep drilling new wells to maintain production. We estimate median full-cycle costs for US exploration and production companies have fallen to about USD70. The marginal barrel, not the median one, balances supply and demand and determines price, so the point at which capex falls will probably be higher. Exactly where depends on expectations of future price. Anecdotally we understand that at USD90/bbl capex is likely to continue at full speed, while at USD75-80/bbl it may fall. This would have a relatively rapid impact on production, suggesting a notional price floor.
Fitch noted that, in the short term we consider a resurgence of supply disruptions and positive action from OPEC the most likely catalysts for a rebound in prices. But without these, further declines might be possible, especially if evidence grows of further weakening of global demand or increasing OPEC spare capacity.
The notional floor is well below the USD100/bbl level that many market participants thought was here to stay earlier this year. But in the last two weeks Brent crude has fallen - and stayed - significantly below USD100/bbl, and WTI crude has fallen below USD90/bbl for the first time since 2012. The difference between the two benchmarks has shrunk to around USD2.50, and forward curves also indicate weakness, Fitch noted.
The key supports for USD100+ oil were growing demand, tight OPEC spare capacity, increasing cost of supply, particularly combined with rapid depletion rates for shale wells, OPEC's desire for high oil prices, and political and security issues in key regions.
Fitch further noted, demand has been the clearest change in the short term, but is also the element that may most reliably reverse in the long term. If China and India grow as expected demand could rise by up to a third in the next 20-30 years - but this does not preclude short-term weakness.
OPEC has declared support for prices at USD100/bbl. Some members would prefer this price or higher, but we estimate Saudi Arabia, which would have to absorb the greatest production cuts, would be able to balance its budget at USD94/bbl. A lot will therefore ride on the outcome of OPEC's next meeting in November, said Fitch.
The geopolitical and security picture has not resulted in the predicted fall in production. Progress is being made on Iranian sanctions; Iraqi production has remained robust; Libyan production is starting to recover. Market sentiment suggests the effects of these situations will remain benign - but there is potential for this to reverse quite rapidly.
We do not expect rating implications from the price dip in the short term. Our corporate and sovereign ratings use price assumptions that drop over time, and companies and governments have shown themselves able to adjust spending to weaker prices if necessary. The rising US dollar, which has strengthened against the euro by around 10% since the middle of the year, is also contributing to weakness in oil prices when expressed in dollar terms, as our price decks are.
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Sunday, 14 September 14
FREIGHT RATES RALLY AS DEMAND INCREASED
COALspot.com: The Baltic Dry Index (BDI) is a number (in US$) issued daily by the London-based Baltic Exchange up 2.25 percent week on week. BDI cl ...
Friday, 12 September 14
U.S. YEAR-TO-DATE COAL PRODUCTION TOTALED 673.3 MMST, SAYS EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 19.20 million short tons (mmst) of coal in ...
Thursday, 11 September 14
THE PANAMAX MARKET IS TAKING A BREATHER - FEARNLEYS
Handy
We have experienced more activity in both hemispheres this week, said Fearnleys in this week's weekly report.
"We see rates c ...
Wednesday, 10 September 14
ARE GREEK BANKS ON THE VERGE TO START LENDING AGAIN? - JOHN N. COTZIAS
It is well known that Greek Banks had suffered severely after the economic crisis of 2008. From that period onwards, major changes have occur ...
Tuesday, 09 September 14
WEAK M&A DESPITE ABUNDANT DISTRESSED INDONESIA COAL ASSETS - FITCH RATINGS
COALspot.com: Fitch Ratings says that a meaningful level of merger and acquisition (M&A) activity leading to a consolidation of the coal sector ...
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- Port Waratah Coal Services - Australia
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- Toyota Tsusho Corporation, Japan
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- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Electricity Authority, New Zealand
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- Trasteel International SA, Italy
- Planning Commission, India
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- Global Business Power Corporation, Philippines
- Australian Coal Association
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- Petron Corporation, Philippines
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- Parliament of New Zealand
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- Minerals Council of Australia
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- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Renaissance Capital - South Africa
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
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- Neyveli Lignite Corporation Ltd, - India
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
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- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Ministry of Transport, Egypt
- Banpu Public Company Limited - Thailand
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- Binh Thuan Hamico - Vietnam
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- MS Steel International - UAE
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- Wilmar Investment Holdings
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- Timah Investasi Mineral - Indoneisa
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- White Energy Company Limited
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- Siam City Cement PLC, Thailand
- San Jose City I Power Corp, Philippines
- OPG Power Generation Pvt Ltd - India
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- Xindia Steels Limited - India
- PTC India Limited - India
- Posco Energy - South Korea
- Bayan Resources Tbk. - Indonesia
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- ASAPP Information Group - India
- Directorate General of MIneral and Coal - Indonesia
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
- Maheswari Brothers Coal Limited - India
- Bhatia International Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
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- Bukit Asam (Persero) Tbk - Indonesia
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- Samtan Co., Ltd - South Korea
- Romanian Commodities Exchange
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
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- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Bharathi Cement Corporation - India
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- GMR Energy Limited - India
- McConnell Dowell - Australia
- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Intertek Mineral Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- The University of Queensland
- Straits Asia Resources Limited - Singapore
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- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
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- TNB Fuel Sdn Bhd - Malaysia
- PetroVietnam Power Coal Import and Supply Company
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- Madhucon Powers Ltd - India
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- Iligan Light & Power Inc, Philippines
- Economic Council, Georgia
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- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
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- VISA Power Limited - India
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- Coalindo Energy - Indonesia
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- Meralco Power Generation, Philippines
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
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- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
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