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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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Thursday, 30 January 20
CAPE: WITH CHINESE NEW YEAR TAKING PLACE, THE RATES ARE REACHING FURTHER DISAPPOINTING LEVELS - FEARNLEYS
Cape
With Chinese New Year taking place, the rates are reaching further disappointing levels. Present TC average is below USD 4,500, off 24% fr ...
Wednesday, 29 January 20
INDONESIA REMAINS AT THE TOP SPOT IN 2019 AS THE LARGEST SUPPLIER OF COAL TO INDIA WITH 91.3 MLN TONNES - BANCHERO COSTA
Despite repeated promises from India’s government to reduce the country’s coal imports and increase domestic self-reliance, volumes jus ...
Wednesday, 29 January 20
MARKET INSIGHT - INTERMODAL
Last week Libya’s oil production operations were disrupted as it was reported that local Libyan tribes interrupted output at the the El Feel ...
Tuesday, 28 January 20
INDONESIA - UNCERTAINTY OVER AVAILABILITY OF LSFO - THE STANDARD CLUB
The club has received reports that low sulphur fuel is not currently readily available in all Indonesian ports and that there are local shortages.
...
Sunday, 26 January 20
SUPRAMAX: THE ASIAN BASIN SAW A 56,000DWT SHIP FIXING DELIVERY SAMARINDA TRIP TO WEST COAST INDIA AT $4,750 - BALTIC BRIEFING
Capesize
The market endured heavy losses throughout the past week, with the Capesize 5TC dropping from $8,352 to $4,772. In the lead up to Chin ...
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- ICICI Bank Limited - India
- Deloitte Consulting - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thai Mozambique Logistica
- CIMB Investment Bank - Malaysia
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Wilmar Investment Holdings
- Anglo American - United Kingdom
- Indian Oil Corporation Limited
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Semirara Mining Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- White Energy Company Limited
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- Samtan Co., Ltd - South Korea
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- The Treasury - Australian Government
- Marubeni Corporation - India
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Vizag Seaport Private Limited - India
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Trasteel International SA, Italy
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Agrawal Coal Company - India
- Aditya Birla Group - India
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- MS Steel International - UAE
- Uttam Galva Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Sojitz Corporation - Japan
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Posco Energy - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Singapore Mercantile Exchange
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- Latin American Coal - Colombia
- Africa Commodities Group - South Africa
- Bayan Resources Tbk. - Indonesia
- Merrill Lynch Commodities Europe
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- Ind-Barath Power Infra Limited - India
- Oldendorff Carriers - Singapore
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- PowerSource Philippines DevCo
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- Krishnapatnam Port Company Ltd. - India
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Intertek Mineral Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Parliament of New Zealand
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bharathi Cement Corporation - India
- ASAPP Information Group - India
- Chettinad Cement Corporation Ltd - India
- Romanian Commodities Exchange
- Miang Besar Coal Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Economic Council, Georgia
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- PTC India Limited - India
- Interocean Group of Companies - India
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- PetroVietnam Power Coal Import and Supply Company
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Thiess Contractors Indonesia
- Iligan Light & Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- Central Electricity Authority - India
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Barasentosa Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- CNBM International Corporation - China
- Electricity Generating Authority of Thailand
- Edison Trading Spa - Italy
- Savvy Resources Ltd - HongKong
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Baramulti Group, Indonesia
- Binh Thuan Hamico - Vietnam
- Renaissance Capital - South Africa
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- Mercator Lines Limited - India
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- The University of Queensland
- Ambuja Cements Ltd - India
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Carbofer General Trading SA - India
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Power Finance Corporation Ltd., India
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- Cigading International Bulk Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Minerals Council of Australia
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- New Zealand Coal & Carbon
- SMC Global Power, Philippines
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhushan Steel Limited - India
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
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