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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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Wednesday, 11 March 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.07 PCT - XINHUA
China Taiyuan coal transaction price index stood at 133.16 points Monday, up 0.07 percent week on week.
The index, released by China ...
Wednesday, 11 March 20
SHIPPING MARKET INSIGHT - INTERMODAL
On the 4th of September the Baltic Dry Index marked its highest level for 2019, reaching 2,518 points, while the rest of the dry indices also recor ...
Tuesday, 10 March 20
SHIPPING MARKET ANALYSIS
It might be already overstated, but it seems to be important to point out once again how peculiar the current circumstances are.
Before the st ...
Tuesday, 10 March 20
EIA FORECASTS U.S ELECTRIC POWER SECTOR DEMAND FOR COAL WILL FALL BY 81 MMST (15%) IN 2020
EIA forecasts that U.S. coal production will total 595 million short tons (MMst) in 2020, down 95 MMst (14%) from 2019. According to EIA's Shor ...
Tuesday, 10 March 20
CORONAVIRUS: DEMAND DOWNGRADES FOR BULK COMMODITIES - WOOD MACKENZIE
The coronavirus outbreak is a rapidly evolving news story – and a real wildcard for bulks demand. Our global experts are monitoring the impac ...
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- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- GAC Shipping (India) Pvt Ltd
- Marubeni Corporation - India
- Rashtriya Ispat Nigam Limited - India
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- SMC Global Power, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Central Electricity Authority - India
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Jindal Steel & Power Ltd - India
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- McConnell Dowell - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Coalindo Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Riau Bara Harum - Indonesia
- Electricity Generating Authority of Thailand
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Bukit Makmur.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Parry Sugars Refinery, India
- Kapuas Tunggal Persada - Indonesia
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Sojitz Corporation - Japan
- Medco Energi Mining Internasional
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Carbofer General Trading SA - India
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Banpu Public Company Limited - Thailand
- Bukit Baiduri Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- GVK Power & Infra Limited - India
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Leighton Contractors Pty Ltd - Australia
- Coal and Oil Company - UAE
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- The University of Queensland
- Meralco Power Generation, Philippines
- Savvy Resources Ltd - HongKong
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- White Energy Company Limited
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Africa Commodities Group - South Africa
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Sical Logistics Limited - India
- Petron Corporation, Philippines
- India Bulls Power Limited - India
- PTC India Limited - India
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Heidelberg Cement - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Bhoruka Overseas - Indonesia
- Trasteel International SA, Italy
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mjunction Services Limited - India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- LBH Netherlands Bv - Netherlands
- OPG Power Generation Pvt Ltd - India
- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Bulk Trading Sa - Switzerland
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Indika Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Karaikal Port Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Aditya Birla Group - India
- Malabar Cements Ltd - India
- Mintek Dendrill Indonesia
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Singapore Mercantile Exchange
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Tamil Nadu electricity Board
- Altura Mining Limited, Indonesia
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Thai Mozambique Logistica
- Ceylon Electricity Board - Sri Lanka
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Orica Mining Services - Indonesia
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
- Renaissance Capital - South Africa
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- Jaiprakash Power Ventures ltd
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Borneo Indobara - Indonesia
- Global Business Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
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