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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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Saturday, 18 January 20
GERMAN STEAM COAL IMPORTS IN 2019 PLUMMETED BY 17 % - COAL IMPORTERS ASSOCIATION
Press Release: According to preliminary calculations by the German Coal Importers Association (Verein der Kohlenimporteure e. V.), world trade in h ...
Saturday, 18 January 20
A 61,400 DWT FIXED FROM SOUTH EAST ASIA DELIVERY EAST KALIMANTAN REDELIVERY WEST COAST INDIA IN THE LOW $7,000S - BALTIC BRIEFING
Capesize
The market was relatively stable over this past week putting an end to the past months of more extreme declines. While the Capesize 5T ...
Friday, 17 January 20
EIA ESTIMATES THAT U.S. COAL PRODUCTION DECLINED BY 65 MMST (9%) TO 690 MMST IN 2019. IN 2020, COAL PRODUCTION WILL DECLINE BY A FURTHER 14% TO 597 MMST
U.S. Coal Supply.
EIA estimates that U.S. coal production declined by 65 million short tons (MMst) (9%) to 690 MMst in 2019. In 2020, EIA ...
Friday, 17 January 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index, a gauge of coal p ...
Thursday, 16 January 20
SUPRAMAX: INDO/CHINA ROUND VOYAGE FIXING AROUND LOW/MID USD 6,000 BSS APS INDO - FEARNLEYS
Capesize
Still very rough seas for the big ships, with the majority of the fleet trading Far East or fronthaul and consequently earning far les ...
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- Indogreen Group - Indonesia
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- GAC Shipping (India) Pvt Ltd
- International Coal Ventures Pvt Ltd - India
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- New Zealand Coal & Carbon
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- LBH Netherlands Bv - Netherlands
- Australian Coal Association
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- Economic Council, Georgia
- GN Power Mariveles Coal Plant, Philippines
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhoruka Overseas - Indonesia
- Medco Energi Mining Internasional
- Directorate Of Revenue Intelligence - India
- Sindya Power Generating Company Private Ltd
- London Commodity Brokers - England
- Central Java Power - Indonesia
- Malabar Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
- Deloitte Consulting - India
- Sakthi Sugars Limited - India
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Kepco SPC Power Corporation, Philippines
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- Toyota Tsusho Corporation, Japan
- Kohat Cement Company Ltd. - Pakistan
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
- Parry Sugars Refinery, India
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- Baramulti Group, Indonesia
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- IHS Mccloskey Coal Group - USA
- Iligan Light & Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Bayan Resources Tbk. - Indonesia
- Ind-Barath Power Infra Limited - India
- Ambuja Cements Ltd - India
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- European Bulk Services B.V. - Netherlands
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Singapore Mercantile Exchange
- Kalimantan Lumbung Energi - Indonesia
- CNBM International Corporation - China
- Indika Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- Wilmar Investment Holdings
- Neyveli Lignite Corporation Ltd, - India
- Tata Chemicals Ltd - India
- SN Aboitiz Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- VISA Power Limited - India
- Samtan Co., Ltd - South Korea
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- PetroVietnam Power Coal Import and Supply Company
- Thai Mozambique Logistica
- Posco Energy - South Korea
- Trasteel International SA, Italy
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Electricity Authority, New Zealand
- Standard Chartered Bank - UAE
- White Energy Company Limited
- Renaissance Capital - South Africa
- Manunggal Multi Energi - Indonesia
- Georgia Ports Authority, United States
- Gujarat Sidhee Cement - India
- Semirara Mining Corp, Philippines
- Lanco Infratech Ltd - India
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Planning Commission, India
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Ceylon Electricity Board - Sri Lanka
- Timah Investasi Mineral - Indoneisa
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Coastal Gujarat Power Limited - India
- Orica Mining Services - Indonesia
- Altura Mining Limited, Indonesia
- Power Finance Corporation Ltd., India
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Indo Tambangraya Megah - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- GMR Energy Limited - India
- Siam City Cement - Thailand
- Africa Commodities Group - South Africa
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Coal Blending Company Limited - Australia
- Karaikal Port Pvt Ltd - India
- Ministry of Finance - Indonesia
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mercator Lines Limited - India
- Intertek Mineral Services - Indonesia
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Star Paper Mills Limited - India
- Attock Cement Pakistan Limited
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Makarim & Taira - Indonesia
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- MS Steel International - UAE
- Minerals Council of Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Sojitz Corporation - Japan
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- GVK Power & Infra Limited - India
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
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