Archive for the ‘Article’ Category

Tight Supply and Demand – Steady Mode (ICP forecast as of 8 April 2015)

Wednesday, April 8th, 2015

The summary of market info as of 8 Apr 2015 is as follows:

  • Saudi Arabia, raised pricing to Asia as refining margins improved for buyers in the country’s biggest market. Defending market share is still an issue due to potential more crude from Latin American producers to Asian market.
  • EIA forecasts that Brent prices will average $59.3/bbl in 2015 and $75.0/bbl in 2016, while WTI prices expected to be $52.47/bbl in 2015 and $70.0/bbl in 2016. The forecast don’t take addition Iranian supply into consideration.
  • If the IAEA verifies Iran’s compliance with curbs on its nuclear program, The U.S. and European Union would lift economic sanctions. This will increase the oil production from Iran and could lead to an annual average growth of about 500,000 barrels a day in global inventories in 2016, stressing storage capacity and pressuring prices.
  • Price forecast poll of 40 market analysts as of 8 Apr’15 estimates Brent at average $66.3 in 2015 and $77.2/bbl in 2016, and WTI at average $60.27/bbl in 2015 and $71.9/bbl in 2016.

Based on the graph, we estimate SLC will be stable to $54.76/bbl in April 2015 and will average $ 56.13/bbl for full year 2015.

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

 

Backwardation mode (Forecast of Indonesian Coal Price reference/HBA as of 1 April 2015)

Wednesday, April 1st, 2015

the summary of coal market info as of 1 Apr 2015 is as follows:

  • Newcastle pricing fell further this week as first-quarter supply tightness continued to give way to improved second-quarter availability. But volatility remained, along with a sizeable premium for prompt delivery. Cargoes for April were available in a comparatively wide range of $61.00-$63.50/t FOB, basis 6,000 kc NAR, but May/June business was bookable at $57.00-$59.00/t FOB, same basis. High-ash Australian cargoes dipped more precipitously, with buyers rejecting bids above $48.50/t FOB, basis 5,500 kc NAR, and moving to renegotiate down earlier business. Indonesian single-mine sub-bituminous was at $49.50/t FOB, basis 4,900 kc NAR, with blends significantly lower
  • The 2014 decline in coal exports was primarily a result of slower growth in world coal demand, lower international coal prices, and higher coal output in other coal-exporting countries compared with 2013. EIA projects coal exports will fall from 97 MMst in 2014 to an annual average of 81 MMst in 2015 and 2016. Global market conditions for coal are not expected to change significantly through 2016.

Based on the graph, we estimate Indonesian Coal Price reference (HBA /Harga Batubara Acuan) will be  $71.37/bbl in April 2015 and will average $ 70.18/bbl for full year 2015.

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

 

Supply is outpacing demand (ICP forecast as of 11 March 2015)

Wednesday, March 11th, 2015

The summary of market info as of 11 Mar 2015 is as follows:

  • EIA reported U.S. crude supplies increased to 448.9 million barrels last week. This caused crude inventories climbed by 4.51 million barrels. This situation seems underpin how weak the fundamental picture in the U.S. to boost the demand.
  • Oil is struggling to sustain a rebound this year amid speculation that a global supply glut that drove prices into a bear market in 2014 may worsen. U.S. crude production and inventories have surged to the highest levels in more than three decades even as the number of oil drilling rigs decreased.
  • EIA forecasts that Brent prices will average $59.5/bbl in 2015 and $75/bbl in 2016, while WTI prices expected to be $52.15/bbl in 2015 and $70.0/bbl in 2016.
  • Reuters crude oil price poll of 34 industry analysts as of 27 Feb’15 estimates Brent at average $59.0 in 2015 and $71.8/bbl in 2016, and WTI at average $54.5 in 2015 and $66.9/bbl in 2016

Based on the graph, we estimate SLC will decrease to $50.2/bbl in Mar 2015 and will average $ 55.1/bbl for full year 2015.

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Weak rebound, Don’t be over excited (ICP forecast as of 10 Feb 2015)

Wednesday, February 11th, 2015

The summary of market info as of  10 Feb 2015 is as follows:

  • International Energy Agency (IEA) reported on cutting their long-term supply forecasts, and also their demand estimates. They warned that lower oil prices will not necessarily boost demand growth as strongly as it might be expected. IEA predicted that global oil prices will recover only partially over the next five years
  • It seems market rebalancing occurring “relatively swiftly”, with increases in inventories halting mid- year and the market tightening. It means a new era of lower equilibrium price would be experienced soon.
  • EIA forecasts that Brent prices will average $58/bbl in 2015 and $75/bbl in 2016, while WTI prices expected to be $55.02/bbl in 2015 and $71.0/bbl in 2016. This price outlook is unchanged from last month’s forecast.
  • Reuters crude oil price poll of 33 industry analysts as of 30 Jan’15 estimates Brent at average $58.3 in 2015 and $69.8/bbl in 2016, and WTI at average $54.2 in 2015 and $64.9/bbl in 2016

Using the methodology of Error Correction Mechanism (ECM) developed by Engle-Grager (2003 Economics Nobel Award) , we update the SLC (Sumateran Light Crude/Minas) forecast is as follows:


Based on the graph, we estimate  SLC will increase to $51.28/bbl in Feb 2015 and will average  $ 56.6/bbl for full year 2015.

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Oil is seeking a “new equilibrium” (ICP forecast as of 13 Jan 2015)

Wednesday, January 14th, 2015

The summary of market info as of  13 Jan 2015 is as follows:

  • The markets are continuing to price in huge oversupply in the first half of 2015. Prices are poised to drop further, testing the ability of U.S. shale drillers to keep pumping.
  • U.S. oil producers are bailing out of long- term contracts for drilling rigs as crude prices sink below $50, another signal that the nation’s shale boom is slowing. While U.S. drilling activity has slowed down in response to the price plunge, it will take months for that to translate into lower supplies.
  • The UAE will stick with a plan to increase oil-production capacity to 3.5 million barrels a day in 2017 even as an oversupply pushed prices to the lowest in more than five years.
  • EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bbl in 2016, while WTI will average $55/bbl in 2015 and $71/bbl in 2016.

Using the methodology of Error Correction Mechanism (ECM) developed by Engle-Grager (2003 Economics Nobel Award) , we update the SLC (Sumateran Light Crude/Minas) forecast is as follows:

Based on the graph, we estimate  SLC will continue down to $46.5/bbl in Jan 2015 and will average  $ 56.6/bbl for full year 2015.

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Fighting on market share (ICP forecast report as of 9 Dec 2014)

Wednesday, December 10th, 2014
The summary of market info as of 9 Dec 2014 is as follows:
  • Oil’s collapse accelerated after OPEC decided Nov. 27 to maintain output levels, underscoring the price war in crude. Crude is trading in a bear market amid signs that U.S. output is expanding even after OPEC opted not to reduce its production quota.
  • Saudi Aramco offer Asian customers the biggest discount on its benchmark crude in at least 14 years, heightening speculation the country is lowering prices to defend market share. In the other side, U.S. oil producers will fight OPEC for the market share.
  • EIA cut its WTI price forecasts to average $62.75 in 2015 versus November projection of $ 77.75. Brent will average at $68.08 /bbl in 2015.
  • BNP Paribas  estimates 2015 WTI at $70, Barclays at $66, Mitsubishi at $70.5.
Using the methodology of Error Correction Mechanism (ECM) developed by Engle-Grager (2003 Economics Nobel Award) , we update the SLC (Sumateran Light Crude/Minas) forecast is as follows:

Based on the graph, we estimate  December SLC will continue down to $64.4/bbl and  2014 SLC will average down to $ 99.0/bbl .

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Price War – Saudi vs US Shale Oil Producers (ICP forecast report as of 13 November 2014)

Thursday, November 13th, 2014
The summary of Market info as of 13 Nov 2014 is as follows:
  • Several US shale oil producers plan on increasing production even though Saudi take the price of crude sold to US down to $ $70 or even 60/bbl. It sign that the economics of shale oil is still viable at 60
  • OPEC reported, they pumped 30.253 million barrels a day in October, a decrease of 226,400 barrels, the largest since March. There is an indication that Saudi Arabia has led declines in the group’s oil output.
  • The result of this “battle” will be determined  after OPEC meeting held on 27 Nov, whether Saudi is willing to cut the production or not.
  • Brent crude fell below $80 a barrel for the first time in four years on speculation OPEC won’t eliminate a global supply glut (Bloomberg, 13 Nov). EIA projects that Brent crude oil prices will average $84.5/bbl in fourth-quarter 2014 and $83.4/bbl in 2015, down more than $10 difference from the previous forecast.
Using the methodology of Error Correction Mechanism (ECM) developed by Engle-Grager (2003 Economics Nobel Award) , we update the SLC (Sumateran Light Crude/Minas) forecast is as follows:

Based on the graph, we estimate  November SLC will continue down to $78.3/bbl and  2014 SLC will average down to $ 100.3/bbl  versus the October projection of  $ 103.9/bbl

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Indonesian Crude Price (ICP) forecast as of 7 Oct 2014 (next release date 12 Nov 2014)

Wednesday, October 8th, 2014

The market situation as reported from EIA and Bloomberg  is summarized below:

  • Supply is adding pressure to WTI. Market is in a downtrend and it may accelerate. WTI extended losses after the American Petroleum Institute reported U.S. crude inventories rose 5.1 million barrels.
  • WTI fell 4.1 percent last week, the most in two months, after Saudi Arabia cut prices for November exports to Asia and the Organization of Petroleum Exporting Countries increased production in September.
  • EIA cut 2014 and 2015 crude price forecasts because of rising output and reduced demand. WTI will average $94.58 a barrel in 2015 versus the September projection of $94.67.
  • Brent crude declined after disappointing German output reinforced concern that global oil demand will falter. EIA projects that Brent crude oil prices will average $98/bbl in fourth-quarter 2014 and $102/bbl in 2015

Using the methodology of Error Correction Mechanism (ECM) developed by Eagle-Grager (2003 Economics Nobel Award) , we update the SLC (Sumateran Light Crude/Minas) forecast is as follows:

Based on the graph, we expect the October SLC will continue down to $94.8/bbl and  SLC will average down to $ 103.9/bbl versus the September projection of  $ 104.7/bbl

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

Indonesian Crude Price (ICP) Forecast as of 9 Sept 2014

Wednesday, September 10th, 2014

EIA (Energy Information Administration) reported in 9 September 2014 as summarized below:

  • Weakening global demand and increased Libyan oil exports contributed to a drop in the North Sea Brent crude oil spot price to an average of $102 per barrel (bbl) in August.
  • West Texas Intermediate crude fell after a government report showed that U.S. refineries reduced operating rates as the peak driving season came to an end.
  • EIA projects that Brent crude oil prices will average $103/bbl in fourth-quarter 2014 and $103/bbl in 2015. The WTI discount to Brent is expected to average $8/bbl in both 2014 and 2015.
  • Supply concern is still high in the oil-producing countries due to geopolitical factors, we expect the market will rebound little bit in the first half of 2015.

The Error Correction model (ECM) is an econometric model to forecast SLC (Sumateran Light Crude/Minas) using historical spot and futures price of WTI data as of 9 September 2014

Based on this report, we expect the September SLC will be down to $97.3/bbl and  the 2014 average price  is $ 104.7/bbl.

Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.

The Art of Decision Making using Real Options

Saturday, February 8th, 2014

This article is based on the recent published book “commitment” in 2013 that was written by Chris Matts and Olav Maassen.
Based on their study, Real Option concept can be used to guide us when to make decision in our life or business.

Overview

Currently, real options is well known as an advance approach in project valuation. However, real options is not only talking about valuation techniques which is very mathematics, it is also talking about the decision making process for managing uncertainty and risk.

The most important aspect on real options is it can guide us when we should decide rather than how to decide. By understanding and responding to the psychological effects uncertainty has on our behavior, we can make better decisions in our life or business. (more…)