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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 $75/bbl over the next few years.
I do, however, believe it is beyond the ability of men to predict the exact shape of the swing cycle, in terms of the period and cycle frequency.
Source: The Jakarta Post
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The writer has been working in the oil and gas business for about 30 years.
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Monday, 23 February 15
Q2' CFR SOUTH CHINA COAL SWAP FOR Q2 ROSE 3.39% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 1.90 (+3.39%) per MT month over month and declined US$ 0.08 ...
Monday, 23 February 15
Q2' API 5 FOB NEWCASTLE COAL SWAP CLOSED $1 HIGHER THAN Q3
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 3.12 per MT (+6.44%) month over month and fall US$ 0.43 (-0.83%) w ...
Sunday, 22 February 15
THE BALTIC DRY INDEX LOST ALMOST 3.2% OR 17 POINTS WEEK ON WEEK
COALspot.com: The Baltic Dry Index, one of the economic indicators that monitors the health of the world's economy by tracking the price of shi ...
Friday, 20 February 15
GOVT SET TO INCREASE COAL OUTPUT TARGET THIS YEAR - JAKARTA POST
The Energy and Mineral Resources Ministry is planning to increase its coal output target this year as the government seeks to offset the ongoing de ...
Friday, 20 February 15
U.S. PRODUCED AROUND 19.2 MILLION SHORT TONS OF COAL WEEK ON WEEK
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.2 million short tons (mmst) of coal ...
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- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- Kapuas Tunggal Persada - Indonesia
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Standard Chartered Bank - UAE
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- Sojitz Corporation - Japan
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Cement Manufacturers Association - India
- Trasteel International SA, Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Mines - Canada
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Australian Coal Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Coal Blending Company Limited - Australia
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- Siam City Cement PLC, Thailand
- Ambuja Cements Ltd - India
- Romanian Commodities Exchange
- Semirara Mining Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Interocean Group of Companies - India
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Mintek Dendrill Indonesia
- MS Steel International - UAE
- SMC Global Power, Philippines
- Indogreen Group - Indonesia
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- IHS Mccloskey Coal Group - USA
- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Baramulti Group, Indonesia
- VISA Power Limited - India
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- The University of Queensland
- Medco Energi Mining Internasional
- Renaissance Capital - South Africa
- Wood Mackenzie - Singapore
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
- Minerals Council of Australia
- Coalindo Energy - Indonesia
- Indian Energy Exchange, India
- CNBM International Corporation - China
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- GVK Power & Infra Limited - India
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Orica Australia Pty. Ltd.
- Orica Mining Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Green Power PLC Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- Edison Trading Spa - Italy
- Kalimantan Lumbung Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Vizag Seaport Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- Kohat Cement Company Ltd. - Pakistan
- Independent Power Producers Association of India
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Planning Commission, India
- Holcim Trading Pte Ltd - Singapore
- AsiaOL BioFuels Corp., Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- Makarim & Taira - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- Petron Corporation, Philippines
- Star Paper Mills Limited - India
- ASAPP Information Group - India
- PTC India Limited - India
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