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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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Tuesday, 03 March 20
IMPORTANCE OF MASTER'S CARGO CHECKS - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
Adecision in recent High Court case has made it clear that there is no implied indemnity from a charterer to their counte ...
Tuesday, 03 March 20
COAL'S SHARE OF CHINA ENERGY MIX FALLS IN 2019 BUT CONSUMPTION STILL RISING - REUTERS
Coal accounted for 57.7% of China’s primary energy consumption in 2019, the National Bureau of Statistics said on Friday, down 1.5 percentage ...
Monday, 02 March 20
SHIPOWNERS AND OPERATORS COULD FACE DETENTION OF SHIPS FROM 1ST MARCH UNDER IMO RULE - ICS
Port state control authorities will begin to enforce the IMO’s Sulphur 2020 from 1st March, making it an offense for ships to carry fuel that ...
Saturday, 29 February 20
SUPRAMAX SENTIMENT WAS UP IN A FEW KEY AREAS OVER THE LAST WEEK - BALTIC BRIEFING
Capesize
The Capesize market woes related to Coronavirus have now spread through the wider global markets like wildfire. The wider supply and d ...
Thursday, 27 February 20
FOREIGN COMPANIES LIKELY TO SKIP COMMERCIAL COAL BLOCK AUCTIONS - ECONOMIC TIMES
The Centre is in the process of inviting global players for commercial mining, following 100% foreign direct investment in the sector. However, giv ...
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- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- The University of Queensland
- Pipit Mutiara Jaya. PT, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bangladesh Power Developement Board
- Mjunction Services Limited - India
- Videocon Industries ltd - India
- Deloitte Consulting - India
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Heidelberg Cement - Germany
- Trasteel International SA, Italy
- Romanian Commodities Exchange
- Mercator Lines Limited - India
- Parry Sugars Refinery, India
- Timah Investasi Mineral - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Mercuria Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- European Bulk Services B.V. - Netherlands
- Mintek Dendrill Indonesia
- Thiess Contractors Indonesia
- PNOC Exploration Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Electricity Generating Authority of Thailand
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Sree Jayajothi Cements Limited - India
- Singapore Mercantile Exchange
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- McConnell Dowell - Australia
- Orica Mining Services - Indonesia
- Vedanta Resources Plc - India
- SMC Global Power, Philippines
- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Eastern Coal Council - USA
- Kartika Selabumi Mining - Indonesia
- Semirara Mining Corp, Philippines
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- Antam Resourcindo - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Edison Trading Spa - Italy
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Siam City Cement - Thailand
- Agrawal Coal Company - India
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Altura Mining Limited, Indonesia
- Australian Coal Association
- Rio Tinto Coal - Australia
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- GVK Power & Infra Limited - India
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- Coalindo Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Star Paper Mills Limited - India
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- South Luzon Thermal Energy Corporation
- Bhatia International Limited - India
- Aboitiz Power Corporation - Philippines
- Indian Energy Exchange, India
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Riau Bara Harum - Indonesia
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Tamil Nadu electricity Board
- Wilmar Investment Holdings
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Energy Link Ltd, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Intertek Mineral Services - Indonesia
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Oldendorff Carriers - Singapore
- GAC Shipping (India) Pvt Ltd
- Sarangani Energy Corporation, Philippines
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Malabar Cements Ltd - India
- SMG Consultants - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- The State Trading Corporation of India Ltd
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Attock Cement Pakistan Limited
- The Treasury - Australian Government
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Metalloyd Limited - United Kingdom
- Barasentosa Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Energy Development Corp, Philippines
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kohat Cement Company Ltd. - Pakistan
- Dalmia Cement Bharat India
- Kobexindo Tractors - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Central Java Power - Indonesia
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
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