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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, 12 February 20
MARKET INSIGHT - INTERMODAL
The recent Coronavirus outbreak in China has led to a global health emergency by World Health Organization and it is yet to be seen how long the ph ...
Wednesday, 12 February 20
CHANGES IN LNG MARKET COULD UNDERCUT PLANS FOR NEW JAPANESE COAL PLANTS - CLYDE RUSSELL
Reuters: Clyde Russell
The collapse in the spot price of liquefied natural gas (LNG) in Asia is a short-term phenomenon that may wel ...
Wednesday, 12 February 20
THE SHIPPING INDUSTRY SEES FREIGHT MARKETS IN A COMPLETE STATE OF COLLAPSE AS DEMAND GETS PARALYZED DUE TO CORONAVIRUS OUTBREAK - ALLIED
With China and the world still trying to contain the effects and come to terms with the Wuhan novel coronavirus outbreak, the shipping industry see ...
Wednesday, 12 February 20
WORLD STEEL PRODUCTION IN 2019 - BANCHERO COSTA
In a worrying development, global steel production slowed down considerably in the fourth quarter of 2019. In the final 3 months of 2019, total cru ...
Sunday, 09 February 20
SUPRAMAX: THE ASIAN ARENA STRUGGLED, A 50,000DWT SHIP FIXING A COAL RUN FROM EAST KALIMANTAN TO INDIA AT $2,000 - THE BALTIC BRIEFING
Capesize
The Capesize market endured another dreadful week of calamitous rate level falls, as the usual season low Q1 period combined with rece ...
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- Romanian Commodities Exchange
- GVK Power & Infra Limited - India
- Indika Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Aboitiz Power Corporation - Philippines
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Australian Commodity Traders Exchange
- Parliament of New Zealand
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Marubeni Corporation - India
- South Luzon Thermal Energy Corporation
- Merrill Lynch Commodities Europe
- Dalmia Cement Bharat India
- Siam City Cement - Thailand
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- VISA Power Limited - India
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- CNBM International Corporation - China
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Posco Energy - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Economic Council, Georgia
- Goldman Sachs - Singapore
- Port Waratah Coal Services - Australia
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Bhushan Steel Limited - India
- Miang Besar Coal Terminal - Indonesia
- Mintek Dendrill Indonesia
- Kideco Jaya Agung - Indonesia
- Singapore Mercantile Exchange
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- White Energy Company Limited
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- Aditya Birla Group - India
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Formosa Plastics Group - Taiwan
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bharathi Cement Corporation - India
- Bhoruka Overseas - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Africa Commodities Group - South Africa
- Holcim Trading Pte Ltd - Singapore
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Sakthi Sugars Limited - India
- Indo Tambangraya Megah - Indonesia
- Global Coal Blending Company Limited - Australia
- Semirara Mining Corp, Philippines
- TeaM Sual Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Planning Commission, India
- Wilmar Investment Holdings
- Rashtriya Ispat Nigam Limited - India
- Grasim Industreis Ltd - India
- Malabar Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- The University of Queensland
- Gujarat Electricity Regulatory Commission - India
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- Eastern Energy - Thailand
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- New Zealand Coal & Carbon
- Globalindo Alam Lestari - Indonesia
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- ASAPP Information Group - India
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Anglo American - United Kingdom
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Sical Logistics Limited - India
- Indonesian Coal Mining Association
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- CIMB Investment Bank - Malaysia
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Salva Resources Pvt Ltd - India
- Madhucon Powers Ltd - India
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Electricity Generating Authority of Thailand
- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Ministry of Finance - Indonesia
- Rio Tinto Coal - Australia
- Thai Mozambique Logistica
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indian Energy Exchange, India
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Agrawal Coal Company - India
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Gujarat Sidhee Cement - India
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Medco Energi Mining Internasional
- Billiton Holdings Pty Ltd - Australia
- Deloitte Consulting - India
- Ministry of Transport, Egypt
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- PetroVietnam Power Coal Import and Supply Company
- Australian Coal Association
- Therma Luzon, Inc, Philippines
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- GAC Shipping (India) Pvt Ltd
- Kepco SPC Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Edison Trading Spa - Italy
- Cigading International Bulk Terminal - Indonesia
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