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Wednesday, 10 June 20
OPEC+ CUTS EXTENSION TO ACCELERATE MARKET REBALANCING - FITCH RATINGS
 Fitch Ratings-London-08 June 2020: The OPEC+ agreement to extend by one month record oil production cuts should accelerate market rebalancing, Fitch Ratings says. This is further supported by a commitment to improve compliance from those countries that were unable to reach full conformity with the cuts.
The OPEC+ countries have made radical production cuts in the stress scenario, but it may be more difficult to reach a consensus when the worst of the crisis is over. And it is unclear whether the recovery in oil prices to date is sustainable. Furthermore, demand and production in non-OPEC+ countries, notably the US, will continue to have a significant impact on the supply-demand balance and prices. We believe that a normalisation of oil inventory built up in 1H20 will take at least several months.
Crude oil prices rose significantly in May and continued to improve in early June, because the surplus has been reduced materially. A price differential between the physical and financial markets has disappeared, pointing to crude oil market tightening. We believe that a stress case scenario with prices falling significantly below USD30/bbl is now less likely. The market is likely to experience a production deficit in 2H20 due to gradually improving demand and reduced supply.
The OPEC+ cuts were the major contributor to market rebalancing. We estimate that the OPEC+ countries reduced production by around 7.5mmbpd in May compared to March. The cumulative OPEC+ cuts should exceed 9mmbpd in June as Saudi Arabia, Kuwait and UAE have committed to cut an additional 1.1mmbpd, while Iraq and Nigeria, which underperformed in May, have promised to improve compliance in June. A resumption of production in Libya, which is not subject to the OPEC+ deal, may increase supply but should be more than offset by additional cuts elsewhere.
Furthermore, production fell in the US as a result both of shut-ins and reduced drilling activity by almost 2mmbpd at end-May compared to March, while Canada cut around 1mmbpd. The number of active drilling rigs in the US declined by 64% compared to the beginning of the year. Production in North America may continue to shrink for a while, but the pace is likely to decelerate due to increased prices. We believe that at USD30/bbl, many producers should be able to stabilise production, while at USD40/bbl or above some would be tempted to increase output, which could limit price recovery.
Estimates suggest crude oil demand increased in May compared to April, and we believe it will improve further from June due to the gradual lifting of lockdown restrictions. Implied oil products consumption in the US improved from a 28% drop in April yoy to a 20% drop in May, driven mainly by increased gasoline consumption (a yoy decline of 25% in May compared to a 44% decline in April), while the consumption of jet fuel remained flat. We believe consumption patterns are similar in Europe, while demand in China bottomed out in February.
Demand recovery is now key in achieving balance in the oil market. It could be undermined in the event of a second coronavirus wave and the re-introduction of lockdowns, although it is not our base case. While consumption of gasoline and diesel could recover by the year-end, jet fuel may lag behind as international travel restrictions may remain in place and demand for business travel may be structurally impaired.
Our ratings are informed by companies’ projected performance at end-2021, rather than in 2020, provided their liquidity is adequate, as we rate “through the cycle”. While we may recalibrate our near-term oil price assumptions to the pace of market rebalancing, our ratings already assume that the market will recover gradually; therefore the most recent improvements will not prompt portfolio-wide rating actions.
Source: Fitch Ratings
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Wednesday, 06 May 20
COST CHALLENGES IN A US$20/BBL WORLD - WOOD MACKENZIE
A new approach is needed to ensure supply sector resilience
How will US$20/bbl affect the oil and gas supply chain?
It’s going to g ...
Wednesday, 06 May 20
MARKET INSIGHT - INTERMODAL
It comes as no surprise that activity in the dry bulk SnP market remains soft, with asset values caught in the downward spiral generated by the Cov ...
Wednesday, 06 May 20
FLOATING STORAGE OF OIL CARGOES - STANDARD CLUB
KNOWLEDGE TO ELEVATE
Due to a combination of circumstances there is now a worldwide shortage of storage space ashore for both unrefi ...
Wednesday, 06 May 20
IRON ORE TRADE REMAINS REMARKABLY RESILIENT THIS YEAR, AT LEAST IN ASIA - BANCHERO COSTA
Iron ore trade remains remarkably resilient this year, at least in Asia, despite the global economic impact from COVID-19. In the first 4 months of ...
Tuesday, 05 May 20
SUPRAMAXES: YTD SLIDE HAS BEEN 45%, WITH THE AVERAGE FOR 2020 TCA HOLDING AT US$5,793 - ALLIED
It has been almost three months since the WHO officially categorized the current coronavirus outbreak as a global pandemic, an outbreak that has br ...
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- Wood Mackenzie - Singapore
- Indika Energy - Indonesia
- SMG Consultants - Indonesia
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Chamber of Mines of South Africa
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Directorate Of Revenue Intelligence - India
- Indogreen Group - Indonesia
- Aditya Birla Group - India
- The Treasury - Australian Government
- Simpson Spence & Young - Indonesia
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Bhatia International Limited - India
- Deloitte Consulting - India
- Heidelberg Cement - Germany
- Samtan Co., Ltd - South Korea
- Dalmia Cement Bharat India
- Sical Logistics Limited - India
- SN Aboitiz Power Inc, Philippines
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mjunction Services Limited - India
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Posco Energy - South Korea
- Australian Coal Association
- Siam City Cement PLC, Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Pendopo Energi Batubara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Interocean Group of Companies - India
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Kumho Petrochemical, South Korea
- Jaiprakash Power Ventures ltd
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
- Coal and Oil Company - UAE
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Meralco Power Generation, Philippines
- Romanian Commodities Exchange
- Maheswari Brothers Coal Limited - India
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- LBH Netherlands Bv - Netherlands
- Global Coal Blending Company Limited - Australia
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Sree Jayajothi Cements Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Singapore Mercantile Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- GVK Power & Infra Limited - India
- Medco Energi Mining Internasional
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- New Zealand Coal & Carbon
- Semirara Mining and Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- PTC India Limited - India
- Ministry of Mines - Canada
- Trasteel International SA, Italy
- Vizag Seaport Private Limited - India
- McConnell Dowell - Australia
- Bhoruka Overseas - Indonesia
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- White Energy Company Limited
- GMR Energy Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Africa Commodities Group - South Africa
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Bukit Makmur.PT - Indonesia
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Star Paper Mills Limited - India
- Globalindo Alam Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- CIMB Investment Bank - Malaysia
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Altura Mining Limited, Indonesia
- India Bulls Power Limited - India
- Economic Council, Georgia
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Sojitz Corporation - Japan
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Sidhee Cement - India
- Holcim Trading Pte Ltd - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ambuja Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Parliament of New Zealand
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kideco Jaya Agung - Indonesia
- Riau Bara Harum - Indonesia
- Sarangani Energy Corporation, Philippines
- Renaissance Capital - South Africa
- Coalindo Energy - Indonesia
- Ministry of Finance - Indonesia
- Latin American Coal - Colombia
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- The University of Queensland
- Savvy Resources Ltd - HongKong
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Aboitiz Power Corporation - Philippines
- Agrawal Coal Company - India
- Uttam Galva Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- Therma Luzon, Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bangladesh Power Developement Board
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