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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, 03 March 15
Q4' FOB INDONESIA COAL SWAP CLOSED 2% LOWER COMPARED TO Q2 CLOSING PRICE OF $ 47.47
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose month on month and declined week over week.
The Q2 swap increased US$ 2.24 ...
Tuesday, 03 March 15
FOB RICHARDS BAY COAL SWAPS: Q2 UP 9.60%; Q3 UP 9.75% W-O-W
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and week on week.
The Q2 swap has soared US$ 5 ...
Monday, 02 March 15
CFR SOUTH CHINA COAL SWAP FOR Q2 DELIVERY REACHED $ 57.50 PMT W/E 27 FEB 2015
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 1.37 (+2.44%) per MT month over month and declined US$ 0.42 ...
Monday, 02 March 15
BORYEONG POWER PLANT OF KOMIPO TO IMPORT 140K OF SUB-BITUMINOUS COAL FOR Q2
COALspot.com - Korea Midland Power Co. Ltd. (KOMIPO) is inviting bids from coal producers, marketing companies, or traders to supply of 140,000 (70 ...
Monday, 02 March 15
FOB NEWCASTLE COAL SWAP ROSE 6.89% MONTH OVER MONTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 3.35 per MT (+6.89%) month over month and US$ 0.40 (0.78%) week on ...
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- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- Bangladesh Power Developement Board
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Thai Mozambique Logistica
- The Treasury - Australian Government
- Indian Energy Exchange, India
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Toyota Tsusho Corporation, Japan
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Ministry of Transport, Egypt
- Cement Manufacturers Association - India
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- India Bulls Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Star Paper Mills Limited - India
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Aboitiz Power Corporation - Philippines
- Central Java Power - Indonesia
- PowerSource Philippines DevCo
- South Luzon Thermal Energy Corporation
- Ministry of Mines - Canada
- Mjunction Services Limited - India
- Anglo American - United Kingdom
- Orica Mining Services - Indonesia
- Independent Power Producers Association of India
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Ambuja Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- Kapuas Tunggal Persada - Indonesia
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Uttam Galva Steels Limited - India
- Metalloyd Limited - United Kingdom
- White Energy Company Limited
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- Attock Cement Pakistan Limited
- International Coal Ventures Pvt Ltd - India
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- Goldman Sachs - Singapore
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- The State Trading Corporation of India Ltd
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Global Coal Blending Company Limited - Australia
- Xindia Steels Limited - India
- Australian Coal Association
- Barasentosa Lestari - Indonesia
- Minerals Council of Australia
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Kartika Selabumi Mining - Indonesia
- Wood Mackenzie - Singapore
- Heidelberg Cement - Germany
- Pendopo Energi Batubara - Indonesia
- Planning Commission, India
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- Kideco Jaya Agung - Indonesia
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Energy Link Ltd, New Zealand
- VISA Power Limited - India
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Cigading International Bulk Terminal - Indonesia
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- Salva Resources Pvt Ltd - India
- Bhushan Steel Limited - India
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sakthi Sugars Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- ICICI Bank Limited - India
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- Leighton Contractors Pty Ltd - Australia
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- TeaM Sual Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- IHS Mccloskey Coal Group - USA
- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sindya Power Generating Company Private Ltd
- Singapore Mercantile Exchange
- Bukit Baiduri Energy - Indonesia
- Coal and Oil Company - UAE
- Dalmia Cement Bharat India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- Larsen & Toubro Limited - India
- Kohat Cement Company Ltd. - Pakistan
- ASAPP Information Group - India
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kobexindo Tractors - Indoneisa
- Central Electricity Authority - India
- Global Business Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Parliament of New Zealand
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Carbofer General Trading SA - India
- Kaltim Prima Coal - Indonesia
- Indogreen Group - Indonesia
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