Despite US crude oil reserves reportedly lower, global oil prices will have difficulty rising as the OPEC still refuses to cut its production rate. In November 2015, the OPEC produced an average of 31.69 million barrels of oil per day (bpd), the highest level in three years and up from 31.38 million bpd in the preceding month. As such, oil may head for around USD $35 per barrel in the weeks ahead, especially if the US dollar strengthens due to the looming US interest rate hike expected later this month. Perhaps conflicts between Russia and Turkey as well as ISIS-related turmoil can give some support to oil prices but we don't expect oil to pass beyond the USD $40 per barrel level this month.

Crude Oil Price:

Low oil prices are not a good sign for those who would like to see higher coal prices. Across the globe, coal production is being cut by mining companies (due to financial necessity but also as a strategy to boost coal prices). This year Glencore Plc, the world's largest thermal coal exporter, cut its coal production by 15 million tons of Australian coal. The company also cut its production forecast for 2016. Also Indonesia - one of the largest coal producers in the world - is expected to see a big decline in coal production in 2016, perhaps even falling below the 300 million tons level. However, despite production cuts coal prices have continued to decline due to persistently low demand.

Chinese coal imports can be regarded a solid indicator of coal demand (China being the world's largest energy consumer). In the January-November 2015 period, coal imports into China fell over 30 percent from the same period last year.

Commercial intelligence company Wood Mackenzie stated that over 65 percent of the world's coal
production is estimated to be unprofitable because prices for thermal and coking coal are heading
for their fifth consecutive year of declines.

Coal Production, Export and Domestic Market Obligation in Indonesia:

(Jan - Oct)
382 million tons 322.5 million tons
(Jan - Oct)
318 million tons 215 million tons
Production Target 435 million tons 425 million tons
Domestic Market Obligation  63 million tons  62 million tons

Source: Ministry of Energy and Mineral Resources

Indonesian Production, Export and Consumption of Coal:

   2007  2008  2009  2010  2011  2012  2013  2014
Production   217   240   254   275   353   412   474   458
Export   163   191   198   210   287   345   402   382
Domestic    61    49    56    65    66    67    72    76

¹ indicates forecast
in million tons

Source: Indonesian Coal Mining Association (APBI)

Further Reading:

Overview & Analysis of Indonesia's Coal Industry