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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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Wednesday, 12 June 24
CHINA ACCOUNTS FOR 16.3% OF AUSTRALIA'S COAL EXPORTS, FOLLOWED BY INDIA 14.4% - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels says Banchero Costa in its latest report.
...
Wednesday, 12 June 24
LNG NEWBUILDING VALUES AT RECORD HIGH: 78 NEWBUILD ORDERS PLACED IN 2024, DOUBLING 2023 - VESON NAUTICAL
The number of LNG newbuilding orders have more than doubled from the same period last year where 34 orders were placed, compared to 78 in the first ...
Monday, 10 June 24
CHINA'S MAY COAL IMPORTS RISE 11% ON LOWER DOMESTIC OUTPUT - REUTERS
China’s imports of coal rose 11% in May from a year earlier, customs data and Reuters records showed on Friday, as lower domestic output this ...
Tuesday, 04 June 24
HOW DO WESTERN SANCTIONS ON RUSSIA IMPACT THE GLOBAL METALS, MINING AND COAL MARKETS - WOOD MACKENZIE
The geopolitical landscape for Russia, as a major supplier of various commodities, has undergone a dramatic transformation since the invasion of Uk ...
Friday, 22 March 24
CASE STUDY: DANGERS OF COAL CARGO - SKULD
Recently, a bulk cargo vessel carrying coal from South Africa to Singapore suffered a fatal accident, resulting in the deaths of three crew members ...
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Showing 21 to 25 news of total 6871 |
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- Australian Commodity Traders Exchange
- Maharashtra Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chamber of Mines of South Africa
- Singapore Mercantile Exchange
- MS Steel International - UAE
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- Directorate General of MIneral and Coal - Indonesia
- Malabar Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Thai Mozambique Logistica
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Simpson Spence & Young - Indonesia
- Latin American Coal - Colombia
- Global Business Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Cement Manufacturers Association - India
- San Jose City I Power Corp, Philippines
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Sical Logistics Limited - India
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kobexindo Tractors - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Leighton Contractors Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- Vedanta Resources Plc - India
- GVK Power & Infra Limited - India
- Indian Oil Corporation Limited
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Wilmar Investment Holdings
- Tamil Nadu electricity Board
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- Sakthi Sugars Limited - India
- Meenaskhi Energy Private Limited - India
- Essar Steel Hazira Ltd - India
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Electricity Authority, New Zealand
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Tata Chemicals Ltd - India
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- SMC Global Power, Philippines
- Borneo Indobara - Indonesia
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Coal and Oil Company - UAE
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- CIMB Investment Bank - Malaysia
- Eastern Energy - Thailand
- Carbofer General Trading SA - India
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wood Mackenzie - Singapore
- London Commodity Brokers - England
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Intertek Mineral Services - Indonesia
- Siam City Cement - Thailand
- Central Electricity Authority - India
- Alfred C Toepfer International GmbH - Germany
- Samtan Co., Ltd - South Korea
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Meralco Power Generation, Philippines
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Makarim & Taira - Indonesia
- Holcim Trading Pte Ltd - Singapore
- IEA Clean Coal Centre - UK
- Edison Trading Spa - Italy
- Ind-Barath Power Infra Limited - India
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Romanian Commodities Exchange
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Agrawal Coal Company - India
- Anglo American - United Kingdom
- Economic Council, Georgia
- Medco Energi Mining Internasional
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Therma Luzon, Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- Indonesian Coal Mining Association
- Rio Tinto Coal - Australia
- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Electricity Generating Authority of Thailand
- South Luzon Thermal Energy Corporation
- Energy Development Corp, Philippines
- Altura Mining Limited, Indonesia
- Siam City Cement PLC, Thailand
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- The Treasury - Australian Government
- Riau Bara Harum - Indonesia
- Thiess Contractors Indonesia
- Renaissance Capital - South Africa
- Mintek Dendrill Indonesia
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- White Energy Company Limited
- Videocon Industries ltd - India
- Grasim Industreis Ltd - India
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Parry Sugars Refinery, India
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
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