We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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
_________________
The writer has been working in the oil and gas business for about 30 years.
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
|
|
|
Showing 16 to 20 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Petron Corporation, Philippines
- Orica Australia Pty. Ltd.
- Georgia Ports Authority, United States
- Latin American Coal - Colombia
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Directorate Of Revenue Intelligence - India
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- Deloitte Consulting - India
- Minerals Council of Australia
- LBH Netherlands Bv - Netherlands
- ICICI Bank Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- India Bulls Power Limited - India
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Finance - Indonesia
- Standard Chartered Bank - UAE
- Savvy Resources Ltd - HongKong
- PTC India Limited - India
- Chettinad Cement Corporation Ltd - India
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Oldendorff Carriers - Singapore
- MS Steel International - UAE
- Therma Luzon, Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Renaissance Capital - South Africa
- The Treasury - Australian Government
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- Ceylon Electricity Board - Sri Lanka
- TeaM Sual Corporation - Philippines
- Trasteel International SA, Italy
- Ministry of Transport, Egypt
- Indian Oil Corporation Limited
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Central Java Power - Indonesia
- Bhatia International Limited - India
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Commonwealth Bank - Australia
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Parliament of New Zealand
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- Coastal Gujarat Power Limited - India
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Vedanta Resources Plc - India
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Antam Resourcindo - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Krishnapatnam Port Company Ltd. - India
- VISA Power Limited - India
- London Commodity Brokers - England
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Malabar Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Global Business Power Corporation, Philippines
- GMR Energy Limited - India
- Medco Energi Mining Internasional
- Gujarat Sidhee Cement - India
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Bukit Makmur.PT - Indonesia
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Mercator Lines Limited - India
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Africa Commodities Group - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Indogreen Group - Indonesia
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Makarim & Taira - Indonesia
- Altura Mining Limited, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- McConnell Dowell - Australia
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- New Zealand Coal & Carbon
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- SMC Global Power, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Rio Tinto Coal - Australia
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Carbofer General Trading SA - India
- Goldman Sachs - Singapore
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Binh Thuan Hamico - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Ind-Barath Power Infra Limited - India
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Interocean Group of Companies - India
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- Rashtriya Ispat Nigam Limited - India
- Tamil Nadu electricity Board
|
| |
| |
|
