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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, 13 February 24
WHAT IS THE OUTLOOK FOR THE NATURAL GAS SPOT PRICE IN 2024 AND 2025? EIA
We expect the U.S. benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023, but to remain lower than $3.00 per m ...
Monday, 12 February 24
US THERMAL COAL EXPORTS HIT 5-YEAR HIGHS AND TOP $5 BLN IN 2023 - REUTERS
United States exporters of thermal coal earned more than $5 billion in 2023 as they shipped out more than 32.5 million metric tons of the high-poll ...
Tuesday, 06 February 24
NEW E-FUELS PROJECT TO MAKE INTERNATIONAL SHIPPING CLIMATE-NEUTRAL - RINA
Transport and trade on the ocean blue must be made much greener. This is the goal of the new €17 million European GAMMA project, where compani ...
Tuesday, 06 February 24
INDIA SEES ANNUAL COAL OUTPUT UP 10.9% IN 2024/25 - REUTERS
India expects domestic coal output to increase by 10.9% to 1.13 billion metric tons in the fiscal year ending March 2025, a senior government offic ...
Tuesday, 06 February 24
INDIA'S COAL PRODUCTION INCREASES BY 10.3% TO 99.73 MILLION TONNE IN JANUARY - PTI
The country’s coal output rose 10.3 per cent to 99.73 Million Tonne (MT) in January, over the same month in the previous fiscal.
...
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Showing 36 to 40 news of total 6871 |
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- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Coastal Gujarat Power Limited - India
- Iligan Light & Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Independent Power Producers Association of India
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bangladesh Power Developement Board
- Krishnapatnam Port Company Ltd. - India
- Edison Trading Spa - Italy
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- Petron Corporation, Philippines
- Sical Logistics Limited - India
- South Luzon Thermal Energy Corporation
- Kapuas Tunggal Persada - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- GMR Energy Limited - India
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- ICICI Bank Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement - Thailand
- CIMB Investment Bank - Malaysia
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Ministry of Transport, Egypt
- LBH Netherlands Bv - Netherlands
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Attock Cement Pakistan Limited
- Sarangani Energy Corporation, Philippines
- Energy Development Corp, Philippines
- Posco Energy - South Korea
- Bhushan Steel Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- Romanian Commodities Exchange
- Planning Commission, India
- McConnell Dowell - Australia
- SN Aboitiz Power Inc, Philippines
- Parliament of New Zealand
- Bharathi Cement Corporation - India
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- Jaiprakash Power Ventures ltd
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Semirara Mining Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Marubeni Corporation - India
- Chettinad Cement Corporation Ltd - India
- Tamil Nadu electricity Board
- Samtan Co., Ltd - South Korea
- Semirara Mining and Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- European Bulk Services B.V. - Netherlands
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Medco Energi Mining Internasional
- Siam City Cement PLC, Thailand
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- PTC India Limited - India
- OPG Power Generation Pvt Ltd - India
- India Bulls Power Limited - India
- Oldendorff Carriers - Singapore
- Jindal Steel & Power Ltd - India
- Gujarat Electricity Regulatory Commission - India
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Electricity Authority, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Dalmia Cement Bharat India
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Antam Resourcindo - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- Cement Manufacturers Association - India
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Global Coal Blending Company Limited - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Madhucon Powers Ltd - India
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Deloitte Consulting - India
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- SMG Consultants - Indonesia
- Indonesian Coal Mining Association
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Ind-Barath Power Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Aditya Birla Group - India
- Ambuja Cements Ltd - India
- Renaissance Capital - South Africa
- Timah Investasi Mineral - Indoneisa
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- ASAPP Information Group - India
- Goldman Sachs - Singapore
- Interocean Group of Companies - India
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- Parry Sugars Refinery, India
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Rio Tinto Coal - Australia
- Kohat Cement Company Ltd. - Pakistan
- Globalindo Alam Lestari - Indonesia
- VISA Power Limited - India
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Australian Coal Association
- Sinarmas Energy and Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Karbindo Abesyapradhi - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Simpson Spence & Young - Indonesia
- Bukit Baiduri Energy - Indonesia
- Gujarat Sidhee Cement - India
- Carbofer General Trading SA - India
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
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