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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, 05 February 20
CORONAVIRUS AND THE SHIPPING INDUSTRY - WATSON, FARLEY & WILLIAMS
The continued spread of Coronavirus and governmental measures to minimise the impact is likely to affect the shipping industry and supply chain.
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Wednesday, 05 February 20
INDONESIA'S COAL PRICE REFERENCE UP 1.46% IN FEBRUARY
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised up the benchmark price of Indonesian thermal co ...
Wednesday, 05 February 20
MARKET INSIGHT - INTERMODAL
The oil and gas industry benefitted from a strong and solid ground in the previous year. We witnessed a slow but steady increase in bunker’s ...
Wednesday, 05 February 20
RUSSIA EXPORTED 28.6 MLN TONNES OF LNG IN 2019 - REFINITIV
A lot of attention has been paid recently on the surge in LNG exports from the United States. However, another country which is seeing truly expone ...
Tuesday, 04 February 20
CAPE: THE AVERAGE EARNINGS PER DAY FELL BENEATH THE USD 4,000, A LEVEL CONSIDERABLY BELOW EVEN THE MOST CONSERVATIVE OPEX LEVELS - ALLIED
The recent slump in the dry bulk freight market may well have been expected to some degree, but despite this the shock was still overwhelming when ...
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- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Marubeni Corporation - India
- Commonwealth Bank - Australia
- Parliament of New Zealand
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
- New Zealand Coal & Carbon
- GN Power Mariveles Coal Plant, Philippines
- Chamber of Mines of South Africa
- Formosa Plastics Group - Taiwan
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Bhatia International Limited - India
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Oldendorff Carriers - Singapore
- Borneo Indobara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Kumho Petrochemical, South Korea
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- PowerSource Philippines DevCo
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- Singapore Mercantile Exchange
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- ICICI Bank Limited - India
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- Therma Luzon, Inc, Philippines
- Energy Link Ltd, New Zealand
- Interocean Group of Companies - India
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Central Java Power - Indonesia
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- Globalindo Alam Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Bharathi Cement Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- Planning Commission, India
- Xindia Steels Limited - India
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- Ministry of Finance - Indonesia
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Dalmia Cement Bharat India
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- Riau Bara Harum - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Australian Coal Association
- Deloitte Consulting - India
- The University of Queensland
- Trasteel International SA, Italy
- Sinarmas Energy and Mining - Indonesia
- Aditya Birla Group - India
- Mjunction Services Limited - India
- Independent Power Producers Association of India
- Bhoruka Overseas - Indonesia
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- MS Steel International - UAE
- Goldman Sachs - Singapore
- Semirara Mining Corp, Philippines
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Standard Chartered Bank - UAE
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Parry Sugars Refinery, India
- Bukit Baiduri Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Ambuja Cements Ltd - India
- Sojitz Corporation - Japan
- Savvy Resources Ltd - HongKong
- Essar Steel Hazira Ltd - India
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- Thai Mozambique Logistica
- Indian Energy Exchange, India
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- TeaM Sual Corporation - Philippines
- Central Electricity Authority - India
- London Commodity Brokers - England
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Vedanta Resources Plc - India
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Development Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- GMR Energy Limited - India
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- India Bulls Power Limited - India
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Malabar Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Carbofer General Trading SA - India
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Coalindo Energy - Indonesia
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