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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, 25 January 24
THE RED SEA ESCALATION IMPLICATIONS ON GLOBAL SEABORNE TRADE - MARIA BERTZELETOU
In recent days, discussions have intensified about the potential impact on the seaborne trade and ton-miles due to the evolving dynamics of market ...
Thursday, 25 January 24
RED SEA SHIPPING DISRUPTIONS KEEP GEOPOLITICAL PREMIUM FOR COMMODITIES - FITCH RATINGS
Shipping disruptions and re-routing away from the Red Sea will maintain the geopolitical premium in the main commodity markets, including for oil a ...
Friday, 19 January 24
INDONESIA TARGETS 710 MLN METRIC TONS COAL OUTPUT IN 2024 AFTER RECORD 2023 - REUTERS
Indonesia, a major thermal coal exporter, aims to produce 710 million metric tons of coal in 2024, its mining minister said on Monday, after postin ...
Friday, 19 January 24
DRUMMOND COLOMBIA COAL OUTPUT ROSE 7.1% IN 2023 - REUTERS
Coal production from miner Drummond’s Colombia operations rose 7.1% in 2023 to 29.5 million metric tons, while exports declined by 2.6% to 27 ...
Friday, 19 January 24
CHINA'S 2023 COAL OUTPUT HITS RECORD HIGH - REUTERS
China’s coal output reached a record high in 2023, data from the statistics bureau showed on Wednesday, amid an ongoing focus on energy secur ...
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- The Treasury - Australian Government
- Independent Power Producers Association of India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Wilmar Investment Holdings
- Timah Investasi Mineral - Indoneisa
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Sojitz Corporation - Japan
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Bukit Baiduri Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Metalloyd Limited - United Kingdom
- Savvy Resources Ltd - HongKong
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Commonwealth Bank - Australia
- AsiaOL BioFuels Corp., Philippines
- Simpson Spence & Young - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bangladesh Power Developement Board
- Thai Mozambique Logistica
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- India Bulls Power Limited - India
- White Energy Company Limited
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Bhushan Steel Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Jaiprakash Power Ventures ltd
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- Samtan Co., Ltd - South Korea
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- Georgia Ports Authority, United States
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Interocean Group of Companies - India
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- Gujarat Sidhee Cement - India
- Kohat Cement Company Ltd. - Pakistan
- Indian Energy Exchange, India
- Bulk Trading Sa - Switzerland
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- Sical Logistics Limited - India
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Chettinad Cement Corporation Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Sarangani Energy Corporation, Philippines
- Trasteel International SA, Italy
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Ministry of Transport, Egypt
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- PowerSource Philippines DevCo
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- ASAPP Information Group - India
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coalindo Energy - Indonesia
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Planning Commission, India
- PTC India Limited - India
- Kartika Selabumi Mining - Indonesia
- Malabar Cements Ltd - India
- Iligan Light & Power Inc, Philippines
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Karaikal Port Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Bhoruka Overseas - Indonesia
- Formosa Plastics Group - Taiwan
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Jindal Steel & Power Ltd - India
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- Edison Trading Spa - Italy
- Semirara Mining Corp, Philippines
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Kumho Petrochemical, South Korea
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- Australian Coal Association
- TeaM Sual Corporation - Philippines
- SMG Consultants - Indonesia
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Energy Development Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- Ambuja Cements Ltd - India
- Thiess Contractors Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Medco Energi Mining Internasional
- Sinarmas Energy and Mining - Indonesia
- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- Sakthi Sugars Limited - India
- Parry Sugars Refinery, India
- Meralco Power Generation, Philippines
- Africa Commodities Group - South Africa
- Latin American Coal - Colombia
- Orica Australia Pty. Ltd.
- Attock Cement Pakistan Limited
- Toyota Tsusho Corporation, Japan
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement - Thailand
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- International Coal Ventures Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Central Java Power - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Mintek Dendrill Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Eastern Coal Council - USA
- ICICI Bank Limited - India
- CNBM International Corporation - China
- Electricity Authority, New Zealand
- Deloitte Consulting - India
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