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Wednesday, 12 February 20
REFINING SET FOR A CHALLENGING 2020 - WOOD MACKENZIE
 Downstream isn’t the glamorous end of the oil business. And in Big Oil, it’s typically dwarfed by upstream. Yet having been forced to restructure and focus on costs early this century, downstream’s cash flow has underpinned a third of the Majors’ shareholder returns over the last five years.
But a laser-like focus on costs and efficiency can only take you so far. If the external environment turns against you, downstream is as vulnerable as any part of the business. The Majors’ downstream results for Q4 2019 were among the poorest since 2015. Petrochemicals is part of that story, with earnings suffering from over-investment.
Now we’re also seeing refining margins come under increasing pressure, slipping to five-year lows in the last few weeks of 2019 and the first of 2020. Alan Gelder, VP Refining, identifies two main factors.
Firstly, new regulation on marine fuels was expected to boost refining margins this year – but that hasn’t played out as expected yet. The International Maritime Organization (IMO) regulations require all vessels to reduce the level of sulphur in their engine emissions from 3.5% to 0.5% or less from 1 January.
Essentially, IMO should trigger a shift out of low-value product (High Sulphur Fuel Oil, or HSFO) into higher value Very Low Sulphur Fuel Oil (VLSFO). Refinery capacity to make VLSFO is limited, so marine gasoil, which is closely linked to the price of diesel, would top up any shortfall. This shift to high-value products was expected to drive up refining margins in 2020.
It’s only half happened. The price of VLSFO surged in Q4 and HSFO duly collapsed. The surprise was that there’s been much more VLSFO available than expected. Traders had taken advantage of low-price feedstock in late summer 2019 and built up volumes of VLSFO in storage. When the demand came in, they were ready and cashed in, big time. A single tanker loaded with 2 million barrels of VLSFO could make over US$10/bbl on the spread and pull in US$20 million-plus in cash profit.
Producers with the right crude have also fared well. Santos revealed that it had sold a single cargo of heavy sweet crude, ideal feedstock for VLSFO, at an unheard-of US$30/bbl premium to Brent. Nice work if you can get it.
What didn’t really materialise was higher demand for marine gasoil – it’s just not been needed in the volumes anticipated. Weaker marine demand for gasoil has been compounded by soft demand from heating – a much bigger market – because of warm winter weather in the northern hemisphere and lacklustre economic growth. That’s led to a glut of gasoil in inventory which is depressing refining margins.
Second, global oil demand growth forecasts are falling back sharply – potentially a more fundamental problem. The biggest factor is the coronavirus, so we have reduced our demand forecasts in China by almost 0.6 million b/d for Q1 2020. We now expect China demand to fall year-on-year by 125,000 b/d for the quarter, the worst rate since 2009. Global demand will fall by 250,000 b/d, also the worst in over a decade.
So what’s next for refining?
The VLSFO surplus should be a short-term phenomenon. There’s not enough refining capacity to supply all bunker demand with VLSFO. That gap will have to be met by additional gasoil once the surplus VLSFO in inventory is soaked up, by H2 2020 at the latest.
The prospects for oil demand are more worrying and harder to call. At this stage, we have restricted our adjustments to Q1 and left the rest of the year largely unchanged. If the virus can be contained successfully in the coming weeks, demand could bounce back strongly – much as was the case with SARS in 2003.
Refining margins so far in Q1 suggest it will take a while before refining profitability recovers. Meantime, refiners will do what they must to keep costs down and maximise cash flows, including cutting refinery runs to limit the build-up in inventory. It’s about toughing it out, waiting and hoping for demand – China in particular – to perk up again.
Source: Wood Mackenzie
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Friday, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
Based on a strong second half demand, the supply/balance is forecast to strengthen in 2024 but weaken slightly in 2025 as n ...
Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
Global seaborne LNG trade has continued to increase last year, helped also by the events in Ukraine which forced Europe to diversify away from Russ ...
Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
Global coal trade has really picked up pace over the past year, and is now fully back to pre-Covid levels said Banchero Costa Research in its lates ...
Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
A new study from the Massachusetts Institute of Technology (MIT) has thrown a spanner into the plan to transition ships from diesel fuel to ammonia ...
Friday, 02 August 24
ENERGY MARKET DEVELOPMENTS: COAL AND NATURAL GAS PRICES REACH RECORD HIGHS - WORLD BANK
The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
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- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- The Treasury - Australian Government
- Meenaskhi Energy Private Limited - India
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Singapore Mercantile Exchange
- Makarim & Taira - Indonesia
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Malabar Cements Ltd - India
- Rio Tinto Coal - Australia
- Minerals Council of Australia
- London Commodity Brokers - England
- ASAPP Information Group - India
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- McConnell Dowell - Australia
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Formosa Plastics Group - Taiwan
- Altura Mining Limited, Indonesia
- White Energy Company Limited
- Central Java Power - Indonesia
- Planning Commission, India
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- GAC Shipping (India) Pvt Ltd
- Electricity Generating Authority of Thailand
- Sarangani Energy Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Sical Logistics Limited - India
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- SN Aboitiz Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Globalindo Alam Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petron Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Maheswari Brothers Coal Limited - India
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- Eastern Coal Council - USA
- Ministry of Mines - Canada
- Global Business Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wood Mackenzie - Singapore
- Mjunction Services Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- Ministry of Transport, Egypt
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Indian Oil Corporation Limited
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Baramulti Group, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- The University of Queensland
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Cement Manufacturers Association - India
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Siam City Cement PLC, Thailand
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- GMR Energy Limited - India
- Madhucon Powers Ltd - India
- PTC India Limited - India
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Timah Investasi Mineral - Indoneisa
- Jindal Steel & Power Ltd - India
- Independent Power Producers Association of India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Standard Chartered Bank - UAE
- Gujarat Sidhee Cement - India
- Kideco Jaya Agung - Indonesia
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- Global Green Power PLC Corporation, Philippines
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Bharathi Cement Corporation - India
- Power Finance Corporation Ltd., India
- Kohat Cement Company Ltd. - Pakistan
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Attock Cement Pakistan Limited
- Aditya Birla Group - India
- Parliament of New Zealand
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Grasim Industreis Ltd - India
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Vizag Seaport Private Limited - India
- Directorate Of Revenue Intelligence - India
- Goldman Sachs - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- Chamber of Mines of South Africa
- Kobexindo Tractors - Indoneisa
- MS Steel International - UAE
- Indika Energy - Indonesia
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