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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, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
CHINA SEPT COAL OUTPUT HITS SIX-MONTH HIGH ON RISING POWER DEMAND - REUTERS
China’s September coal output rose 0.4% from August to the highest level since March, official data showed on Wednesday, on rising power dema ...
Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
Coal inventories at Indian power plants in the first half of October fell at their fastest rate in two years, an analysis of government data showed ...
Tuesday, 19 September 23
LNG SHIPPING STOCKS: THE ASIAN GROWTH UP-INDICES
Last week, the UP World LNG Shipping Index (UPI) gained 3.81 points or 2.51%, closing at 155.85 points. This index tracks the performance of LNG sh ...
Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- Grasim Industreis Ltd - India
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- Ind-Barath Power Infra Limited - India
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Krishnapatnam Port Company Ltd. - India
- Bayan Resources Tbk. - Indonesia
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Malabar Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- Bukit Makmur.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- Carbofer General Trading SA - India
- Australian Commodity Traders Exchange
- Cigading International Bulk Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- Siam City Cement - Thailand
- Economic Council, Georgia
- Bhatia International Limited - India
- The Treasury - Australian Government
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- PTC India Limited - India
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Mercator Lines Limited - India
- GMR Energy Limited - India
- Posco Energy - South Korea
- Australian Coal Association
- Mjunction Services Limited - India
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Electricity Authority, New Zealand
- New Zealand Coal & Carbon
- Pipit Mutiara Jaya. PT, Indonesia
- Coastal Gujarat Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Eastern Coal Council - USA
- Riau Bara Harum - Indonesia
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Ministry of Transport, Egypt
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Standard Chartered Bank - UAE
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Interocean Group of Companies - India
- Makarim & Taira - Indonesia
- Orica Australia Pty. Ltd.
- Savvy Resources Ltd - HongKong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- Attock Cement Pakistan Limited
- Planning Commission, India
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Coal and Oil Company - UAE
- Electricity Generating Authority of Thailand
- South Luzon Thermal Energy Corporation
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- GVK Power & Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- SN Aboitiz Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Wood Mackenzie - Singapore
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- SMC Global Power, Philippines
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- Kartika Selabumi Mining - Indonesia
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Vedanta Resources Plc - India
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Global Green Power PLC Corporation, Philippines
- Samtan Co., Ltd - South Korea
- PowerSource Philippines DevCo
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Siam City Cement PLC, Thailand
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- White Energy Company Limited
- Petron Corporation, Philippines
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- ASAPP Information Group - India
- Globalindo Alam Lestari - Indonesia
- Minerals Council of Australia
- The University of Queensland
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- Mercuria Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Borneo Indobara - Indonesia
- Ministry of Finance - Indonesia
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Holcim Trading Pte Ltd - Singapore
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- India Bulls Power Limited - India
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Aditya Birla Group - India
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Ministry of Mines - Canada
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- VISA Power Limited - India
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Kaltim Prima Coal - Indonesia
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Goldman Sachs - Singapore
- Parliament of New Zealand
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- Kalimantan Lumbung Energi - Indonesia
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