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Friday, 20 March 20
VOLATILITY TO INCREASE IN TANKER MARKET FOLLOWING OIL PRICE WAR - DREWRY
Crude oil prices plunged by more than a third in the past week after OPEC+ failed to agree on production cut as demand softened in the aftermath of coronavirus (COVID-19). In its recent report, the IEA estimates global oil demand at 99.9 mbpd in 2020, which is around 90,000 bpd lower than in 2019 and a sharp downgrade from the agency’s forecast in February, which predicted global oil demand will grow 825,000 bpd in 2020.
The market expected OPEC+ to cut supply as the COVID-19 epidemic has spread from China to Europe, the Americas and Middle East. However, the negotiations failed due to strong resistance from Russia, which is of the view that the policy of capping production by OPEC+ producers to support the oil price is facilitating the development of US shale oil, with Russia losing its market share to increasing exports from the US.
After the failure of production cut talks in Vienna, Saudi Arabia started a price war by slashing the official selling prices for crude for key buyers in the international market and hinted at raising crude oil production to full capacity of 12.3 mbpd from April 2020. The ‘shock and awe’ tactics of Saudi Arabia could be a move to impose maximum pain in the quickest possible way to Russia and other producers, in an effort to renegotiate the proposed production cut and then quickly reverse the production surge and thereafter implement the production cut if a deal is reached.
However, the recent move by Saudi Arabia could lead to:
a) Renegotiation on a production cut between OPEC and Russia
b) Prolonged price war between OPEC, Russia and US producers
If there are fresh negotiations to implement a production cut by OPEC+ producers to accommodate the effect of declining oil demand, crude oil prices are expected to normalise.
But if there is a prolonged price war between Saudi Arabia, Russia and US shale oil producers, lower crude oil prices will lead to some improvement in global oil demand and refinery runs. At the same time, onshore stocking activity will also increase, especially in countries such as China as they build their Strategic Petroleum Reserve. A global supply glut is also likely to lead to an increase in floating storage especially among oil producers.
At the same time, sustained weakness in oil prices will eventually hurt US shale oil producers because of their relatively higher cost of production. In such circumstances, the market share of Middle Eastern crude will increase at the expense of US crude.
Meanwhile, tanker rates surged due to a sudden increase in VLCC chartering from Bahri, Saudi Arabia’s national shipping arm. Bahri fixed at least 18 VLCCs since the Kingdom aims to pump more crude into the market as its price war with Russia escalates. The VLCC earnings on Middle East–China (TD3C) route skyrocketed to $166,000pd on 11 March from $30,300pd on 06 March.
If Saudi Arabia manages to strike a deal with Russia to cut production in the short term, tanker rates will plummet to the pre-price war levels because of the ongoing weakness in crude oil trade on account of the spread of COVID-19 globally. On the other hand, if there is a prolonged price war, tonnage demand will rise initially with the increase in oil demand and stocking activity, which in turn will keep freight rates above pre-price war levels.
However, once sustained weakness in oil prices starts hurting US crude production, Middle Eastern crude will start displacing US crude in Asia. This in turn will squeeze tonne-mile demand for tankers as the distance between the US to Asia is almost double the distance between the Middle East to Asia. Thus we estimate that every barrel per day of annual decline in US exports to Asia at the expense of the Middle East will lead to about a 2.5% decline in overall tonne-mile demand for tankers. Freight rates in such a situation will plunge below the pre-price war levels.
Source: Drewry
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Wednesday, 11 March 20
SHIPPING MARKET INSIGHT - INTERMODAL
On the 4th of September the Baltic Dry Index marked its highest level for 2019, reaching 2,518 points, while the rest of the dry indices also recor ...
Tuesday, 10 March 20
SHIPPING MARKET ANALYSIS
It might be already overstated, but it seems to be important to point out once again how peculiar the current circumstances are.
Before the st ...
Tuesday, 10 March 20
EIA FORECASTS U.S ELECTRIC POWER SECTOR DEMAND FOR COAL WILL FALL BY 81 MMST (15%) IN 2020
EIA forecasts that U.S. coal production will total 595 million short tons (MMst) in 2020, down 95 MMst (14%) from 2019. According to EIA's Shor ...
Tuesday, 10 March 20
CORONAVIRUS: DEMAND DOWNGRADES FOR BULK COMMODITIES - WOOD MACKENZIE
The coronavirus outbreak is a rapidly evolving news story – and a real wildcard for bulks demand. Our global experts are monitoring the impac ...
Tuesday, 10 March 20
CHINA'S COAL-RICH PROVINCE ENSURES ENERGY SUPPLY AMID EPIDEMIC - XINHUA
China’s coal-rich province of Shanxi has seen more than 500 coal mines resume production in February, which ensured energy supply amid the ou ...
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- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- The State Trading Corporation of India Ltd
- IEA Clean Coal Centre - UK
- GAC Shipping (India) Pvt Ltd
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- Chettinad Cement Corporation Ltd - India
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kideco Jaya Agung - Indonesia
- Heidelberg Cement - Germany
- Sree Jayajothi Cements Limited - India
- Ambuja Cements Ltd - India
- Chamber of Mines of South Africa
- Indo Tambangraya Megah - Indonesia
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- Kaltim Prima Coal - Indonesia
- Australian Commodity Traders Exchange
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- Timah Investasi Mineral - Indoneisa
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- OPG Power Generation Pvt Ltd - India
- India Bulls Power Limited - India
- Port Waratah Coal Services - Australia
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- Xindia Steels Limited - India
- Thiess Contractors Indonesia
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Essar Steel Hazira Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- ASAPP Information Group - India
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- Petron Corporation, Philippines
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- GMR Energy Limited - India
- Minerals Council of Australia
- Sical Logistics Limited - India
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- Thai Mozambique Logistica
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indika Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Indian Oil Corporation Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Miang Besar Coal Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Oldendorff Carriers - Singapore
- Tamil Nadu electricity Board
- Tata Chemicals Ltd - India
- Binh Thuan Hamico - Vietnam
- Therma Luzon, Inc, Philippines
- Ministry of Mines - Canada
- London Commodity Brokers - England
- Central Java Power - Indonesia
- Formosa Plastics Group - Taiwan
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- Jindal Steel & Power Ltd - India
- Deloitte Consulting - India
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- Ministry of Transport, Egypt
- PNOC Exploration Corporation - Philippines
- Mercator Lines Limited - India
- Madhucon Powers Ltd - India
- Kepco SPC Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- Global Business Power Corporation, Philippines
- Africa Commodities Group - South Africa
- IHS Mccloskey Coal Group - USA
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- GVK Power & Infra Limited - India
- PTC India Limited - India
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Mercuria Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Interocean Group of Companies - India
- White Energy Company Limited
- Vijayanagar Sugar Pvt Ltd - India
- MS Steel International - UAE
- Singapore Mercantile Exchange
- Globalindo Alam Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Eastern Energy - Thailand
- The University of Queensland
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Gujarat Electricity Regulatory Commission - India
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Wilmar Investment Holdings
- Gujarat Mineral Development Corp Ltd - India
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