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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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Monday, 03 February 20
KOWEPO INVITING BIDS FOR 2.46 MILLION TONS OF MIN.5700 AND MIN.5600 NCV COAL
COALspot.com: South Korea’s Korea Western Power Co., Ltd. (KOWEPO) has issued an international tender for total 2,460,000 tons of (Sub) Bitum ...
Sunday, 02 February 20
NOVEL CORONAVIRUS OUTBREAK IN CHINA - STANDARD CLUB
Members will be aware of the recent novel coronavirus outbreak in China, which has now been declared a global emergency by the World Health Organis ...
Sunday, 02 February 20
SUPRAMAX: A 52,000DWT SHIP WAS FIXED BASIS DELIVERY SOUTH KALIMANTAN TRIP TO INDIA, AT $6,000 - BALTIC BRIEFING
Capesize
The week proved conspicuous for all the wrong reasons. This was the week when the Baltic Capesize Index (BCI) turned negative, closing ...
Saturday, 01 February 20
50 MILLION PEOPLE QUARANTINED IN CHINA TO CONTAIN SPREAD OF CORONAVIRUS - HOW DOES IT AFFECT SHIPPING? - BIMCO
The outbreak of the novel coronavirus, declared a global health emergency by the WHO, has caused massive uncertainty across the global markets with ...
Saturday, 01 February 20
THERMAL COAL MARKETS: 5 TRENDS TO WATCH OUT FOR IN 2020 - MINING REVIEW
The seaborne thermal coal market entered the year challenged by low priced LNG in the Atlantic and rapidly increasing supply in the Pacific.
&n ...
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- ASAPP Information Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mintek Dendrill Indonesia
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- Planning Commission, India
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Indo Tambangraya Megah - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Price Waterhouse Coopers - Russia
- Renaissance Capital - South Africa
- International Coal Ventures Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Baramulti Group, Indonesia
- Lanco Infratech Ltd - India
- Siam City Cement PLC, Thailand
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Kapuas Tunggal Persada - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- Electricity Authority, New Zealand
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Energy Development Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- MS Steel International - UAE
- Makarim & Taira - Indonesia
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- The University of Queensland
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Gujarat Sidhee Cement - India
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- VISA Power Limited - India
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Coalindo Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Ministry of Transport, Egypt
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Krishnapatnam Port Company Ltd. - India
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Trasteel International SA, Italy
- Central Electricity Authority - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- SMG Consultants - Indonesia
- Sree Jayajothi Cements Limited - India
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Africa Commodities Group - South Africa
- Star Paper Mills Limited - India
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- PTC India Limited - India
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Grasim Industreis Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Timah Investasi Mineral - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Rio Tinto Coal - Australia
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Tamil Nadu electricity Board
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Medco Energi Mining Internasional
- IEA Clean Coal Centre - UK
- Minerals Council of Australia
- Madhucon Powers Ltd - India
- White Energy Company Limited
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- McConnell Dowell - Australia
- Mercuria Energy - Indonesia
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Australian Coal Association
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Bangladesh Power Developement Board
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- Power Finance Corporation Ltd., India
- Ceylon Electricity Board - Sri Lanka
- Indian Energy Exchange, India
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- Parliament of New Zealand
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Jaiprakash Power Ventures ltd
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Salva Resources Pvt Ltd - India
- PowerSource Philippines DevCo
- Anglo American - United Kingdom
- Sojitz Corporation - Japan
- Sakthi Sugars Limited - India
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- New Zealand Coal & Carbon
- Xindia Steels Limited - India
- GMR Energy Limited - India
- Posco Energy - South Korea
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