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Saturday, 22 February 20
THE SURPRISING MOVE IN MARINE FUEL SPREADS - ING
Middle distillates tank
One of the biggest surprises since the implementation of new International Maritime Organization (IMO) sulphur regulations is the weakness we have seen in the middle distillate market. Expectations were that we would see a large share of the shipping industry shift to marine gasoil, which would be a bullish scenario for middle distillate cracks. Instead, gasoil cracks are trading at levels last seen in 2017, falling by more than 50% from their October 2019 highs. A milder than usual winter, and the outbreak of the COVID-19 virus are just two factors adding further pressure on middle distillates.
However, from a shipping perspective, one of the key reasons why we have not seen strength in the market is the fact that demand for very low sulphur fuel oil (VLSFO) has been stronger than expected. As a result, the pick-up in marine gasoil demand has not been as much as anticipated. This has happened despite several reports of off-spec VLSFO. There also appears to be an element of hesitancy to more towards marine gasoil, with concerns over viscosity. This is evident in Asia, where we have seen VLSFO actually trading at a premium to marine gasoil.
Fuel oil cracks rally
While we have seen weakness in middle of the barrel products, fuel oil has strengthened, defying market expectations. The prompt crack in NW Europe has traded from around a US$30/bbl discount late last year to less than a US$15/bbl discount currently. There are several reasons behind this strength.
Firstly, refiners would have made any adjustments they could, be it through refinery upgrades, or adjusting feedstock accordingly to minimise HSFO yields as we moved into 2020.
Secondly, there has been increased interest from US refiners to process HSFO and, looking at fuel oil imports into the US over the last few months, particularly towards the end of 2019, volumes did increase. This move does also appear to reflect the limited availability of heavier crude grades for refiners in the US Gulf, given US sanctions against Venezuela.
Thirdly, and this certainly shouldn’t come as too much of a surprise, we see more ships with scrubbers installed coming online. This would provide some additional support to the demand picture for HSFO. The coronavirus could even have an impact here, with a potential delay in scrubber installations.
Finally, a factor which was more of a risk than a reality was the potential for the US not to extend waivers which allow Iraq to import natural gas and electricity from Iran. If this were to happen, it would likely mean that Iraqi domestic fuel oil consumption would increase for power generation needs, so reducing export availability of fuel oil from the country. The risk of this happening has eased, however, with the US recently extending waivers by another 45 days.
China VLSFO supply set to rise
The VLSFO market was performing well until news that China would provide tax waivers to refiners in the country for lower sulphur fuel oil production, which has set the path for VLSFO output in China to grow. Already there are reports that PetroChina has delivered volumes of VLSFO into bonded storage, where it will likely be retailed to ships. The idea is that China wants to build its capabilities as a bunkering hub, rather than wholesale exports of VLSFO.
What has this all meant for spreads?
The above dynamics have had an impact on marine fuel spreads. The more bearish environment we have seen in the middle distillate market, along with a more constructive HSFO market, has meant that the spot NW Europe gasoil-HSFO spread has narrowed from around US$400/t at certain stages last year to around US$235/t currently. Meanwhile, pressure from potential Chinese VLSFO supply has had a similar impact on the spot VLSFO-HSFO spread, with it falling from a high of US$290/t late last year to around US$165/t currently. Obviously, these narrower spreads increase the payback period for a scrubber, making the economics of an installation not as attractive as it looked last year.
As we see more scrubber fitted ships coming online, it will increasingly eat into the advantage of burning HSFO. Therefore, we believe the spreads are unlikely to trade back out to the highs seen last year.
Source: ING
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Thursday, 19 March 20
A CRUDE TSUNAMI: UP TO 3 MILLION BPD OF EXTRA OIL CAN HIT THE MARKET FROM APRIL, MORE COMING IN MAY - RYSTAD ENERGY
The extra oil coming into the global market from April will be as much as 3 million barrels per day (bpd), Rystad Energy estimates. Two million bpd ...
Thursday, 19 March 20
BIMCO REVISES 2020 FORECAST FOR MAIN SHIPPING MARKETS
The coronavirus pandemic is impacting global shipping demand for 2020 negatively. The speed of the virus spread makes it difficult to assess the fu ...
Thursday, 19 March 20
U.S. COAL EXPORTS DECLINED IN 2019 - EIA
In 2019, U.S. coal exports declined to 93 million short tons (MMst), a 20% decrease from the previous year, according to the U.S. Energy Informatio ...
Thursday, 19 March 20
SOUTH KOREA'S KOSPO INVITED BIDS FOR MIN 3,700 OR MIN 4,200 NCV LOW CALORIFIC VALUE COAL
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO), has issued an international tender for total 160,000 MT (±10%) (80,000 x 2 Panamax) of ...
Wednesday, 18 March 20
DRY BULK: INDONESIAN COAL CARGOES PROVIDING A BIG BOOST IN THE EAST WHERE SENTIMENT FOR HANDIES ALSO STARTED IMPROVING - INTERMODAL
The BDI ended last week with small gains on the back of an encouraging number of cargoes out of key trading regions that helped sustain the reserve ...
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- Kumho Petrochemical, South Korea
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Bhushan Steel Limited - India
- Lanco Infratech Ltd - India
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- Billiton Holdings Pty Ltd - Australia
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- Agrawal Coal Company - India
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- Malabar Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Ceylon Electricity Board - Sri Lanka
- Star Paper Mills Limited - India
- SMC Global Power, Philippines
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- Sree Jayajothi Cements Limited - India
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Parry Sugars Refinery, India
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Rio Tinto Coal - Australia
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Makarim & Taira - Indonesia
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Energy Development Corp, Philippines
- Planning Commission, India
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- IHS Mccloskey Coal Group - USA
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Bhatia International Limited - India
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Mjunction Services Limited - India
- Sindya Power Generating Company Private Ltd
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- The Treasury - Australian Government
- Vizag Seaport Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- McConnell Dowell - Australia
- GVK Power & Infra Limited - India
- Wilmar Investment Holdings
- Indogreen Group - Indonesia
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Bharathi Cement Corporation - India
- Riau Bara Harum - Indonesia
- London Commodity Brokers - England
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Indonesian Coal Mining Association
- GMR Energy Limited - India
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- PNOC Exploration Corporation - Philippines
- Interocean Group of Companies - India
- GAC Shipping (India) Pvt Ltd
- Coalindo Energy - Indonesia
- Mintek Dendrill Indonesia
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Bhoruka Overseas - Indonesia
- Bukit Baiduri Energy - Indonesia
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Australian Coal Association
- Madhucon Powers Ltd - India
- Independent Power Producers Association of India
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Kideco Jaya Agung - Indonesia
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Gujarat Sidhee Cement - India
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- SMG Consultants - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- TNB Fuel Sdn Bhd - Malaysia
- Barasentosa Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- PTC India Limited - India
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Trasteel International SA, Italy
- Deloitte Consulting - India
- International Coal Ventures Pvt Ltd - India
- ASAPP Information Group - India
- Minerals Council of Australia
- Indian Energy Exchange, India
- Altura Mining Limited, Indonesia
- Indian Oil Corporation Limited
- Ministry of Transport, Egypt
- Metalloyd Limited - United Kingdom
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Coal Blending Company Limited - Australia
- White Energy Company Limited
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Marubeni Corporation - India
- Georgia Ports Authority, United States
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