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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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Wednesday, 04 March 20
MARKET INSIGHT - INTERMODAL
As it was expected, the whole world has been focusing on the spread of the Coronavirus, with the fast outbreak being primarily a massive humanitari ...
Wednesday, 04 March 20
CORONAVIRUS: A WILDCARD FOR BULKS DEMAND - WOOD MACKENZIE
The coronavirus is casting a shadow across commodity markets. It has undermined China’s economic sentiment, putting the country’s growt ...
Wednesday, 04 March 20
THERMAL COAL TO 'PHASE OUT', STRONG DEMAND FOR COKING COAL: PLATO - SYDNEY MORNING HERALD
Plato Investments managing director Don Hamson says Australian iron ore producers are set to benefit in the fallout from coronavirus as China will ...
Wednesday, 04 March 20
CHINA PROVINCE TO CLOSE 10 MLN TONNES OF COAL CAPACITY IN 2020 - XINHUA
Southwest China’s Guizhou Province plans to phase out 10 million tonnes of outdated coal production capacity by closing 80 coal mines in 2020 ...
Wednesday, 04 March 20
UKRAINE PRODUCED OVER 2.55 MLN TONNES OF COAL IN FEBRUARY - UKRINFORM
In February 2020, Ukraine produced over 2.55 million tonnes of coal, which is 0.2% less than planned.
The Coal Miners Union of Ukrai ...
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- McConnell Dowell - Australia
- Minerals Council of Australia
- Bulk Trading Sa - Switzerland
- India Bulls Power Limited - India
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- Binh Thuan Hamico - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Parliament of New Zealand
- Asmin Koalindo Tuhup - Indonesia
- White Energy Company Limited
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Africa Commodities Group - South Africa
- Parry Sugars Refinery, India
- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- PetroVietnam Power Coal Import and Supply Company
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Bharathi Cement Corporation - India
- Timah Investasi Mineral - Indoneisa
- Intertek Mineral Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Directorate Of Revenue Intelligence - India
- Orica Mining Services - Indonesia
- Indika Energy - Indonesia
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Baramulti Group, Indonesia
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- ICICI Bank Limited - India
- Rashtriya Ispat Nigam Limited - India
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- Energy Development Corp, Philippines
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Coastal Gujarat Power Limited - India
- Madhucon Powers Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- MS Steel International - UAE
- Economic Council, Georgia
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Mercator Lines Limited - India
- Bhushan Steel Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kohat Cement Company Ltd. - Pakistan
- Anglo American - United Kingdom
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Electricity Authority, New Zealand
- Attock Cement Pakistan Limited
- New Zealand Coal & Carbon
- Manunggal Multi Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Australian Commodity Traders Exchange
- Mercuria Energy - Indonesia
- Port Waratah Coal Services - Australia
- Tamil Nadu electricity Board
- Gujarat Mineral Development Corp Ltd - India
- International Coal Ventures Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Bhatia International Limited - India
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- CIMB Investment Bank - Malaysia
- Coalindo Energy - Indonesia
- Marubeni Corporation - India
- Grasim Industreis Ltd - India
- Indian Oil Corporation Limited
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Altura Mining Limited, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Renaissance Capital - South Africa
- Eastern Coal Council - USA
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Bhoruka Overseas - Indonesia
- Independent Power Producers Association of India
- Salva Resources Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Rio Tinto Coal - Australia
- Malabar Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Gujarat Sidhee Cement - India
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Central Java Power - Indonesia
- Globalindo Alam Lestari - Indonesia
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Planning Commission, India
- Ambuja Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Barasentosa Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Global Coal Blending Company Limited - Australia
- Pendopo Energi Batubara - Indonesia
- Borneo Indobara - Indonesia
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Bahari Cakrawala Sebuku - Indonesia
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wilmar Investment Holdings
- SMC Global Power, Philippines
- Mintek Dendrill Indonesia
- CNBM International Corporation - China
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- Uttam Galva Steels Limited - India
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- Romanian Commodities Exchange
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Lanco Infratech Ltd - India
- Kideco Jaya Agung - Indonesia
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Ministry of Finance - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Directorate General of MIneral and Coal - Indonesia
- IEA Clean Coal Centre - UK
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