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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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Monday, 24 February 20
CHINA SAYS MAJOR COAL FIRMS RESTORE 95% OF PRODUCTION CAPACITY - REUTERS
China’s coal companies controlled by the central government have resumed operations and are back at more than 95% of their capacity, an offic ...
Sunday, 23 February 20
SHIPPING INDUSTRY FACES $370 MILLION HIT FROM NEW PANAMA CANAL CHARGE - REUTERS
A new “freshwater” charge that came in this month to help the Panama Canal cope with climate change will cost the shipping industry up ...
Sunday, 23 February 20
A 57,000DWT SHIP FIXING DELIVERY SOUTH KALIMANTAN TRIP, REDELIVERY CJK, AT $7,600 - BALTIC BRIEFING
Capesize
The Capesize market found little to cheer about this week as it again endured remarkable lows. The Atlantic continued to improve, with ...
Saturday, 22 February 20
THE SURPRISING MOVE IN MARINE FUEL SPREADS - ING
Middle distillates tank
One of the biggest surprises since the implementation of new International Maritime Organization (IMO) sulphur regulati ...
Friday, 21 February 20
CAPE: AVERAGE NOMINAL DAILY EARNINGS STILL ADMITTEDLY UNCHANGED W-O-W AT BELOW US$3000 - FEARNLEYS
CAPE
The worst may just about be over for the big ships. Average nominal daily earnings still admittedly unchanged w-o-w at below US$3k, but sent ...
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- Jindal Steel & Power Ltd - India
- Kepco SPC Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Indian Energy Exchange, India
- Heidelberg Cement - Germany
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Marubeni Corporation - India
- Bhatia International Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Electricity Authority, New Zealand
- Power Finance Corporation Ltd., India
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Wilmar Investment Holdings
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- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Australian Coal Association
- Coal and Oil Company - UAE
- Singapore Mercantile Exchange
- The University of Queensland
- Indika Energy - Indonesia
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Port Waratah Coal Services - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- Indian Oil Corporation Limited
- Global Business Power Corporation, Philippines
- Thai Mozambique Logistica
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- The Treasury - Australian Government
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Siam City Cement - Thailand
- Central Java Power - Indonesia
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Central Electricity Authority - India
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Kalimantan Lumbung Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Miang Besar Coal Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
- Cigading International Bulk Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- Attock Cement Pakistan Limited
- Latin American Coal - Colombia
- Bayan Resources Tbk. - Indonesia
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Sojitz Corporation - Japan
- Kideco Jaya Agung - Indonesia
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- Ministry of Transport, Egypt
- Bahari Cakrawala Sebuku - Indonesia
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- PowerSource Philippines DevCo
- GMR Energy Limited - India
- IHS Mccloskey Coal Group - USA
- SMC Global Power, Philippines
- Essar Steel Hazira Ltd - India
- CIMB Investment Bank - Malaysia
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Borneo Indobara - Indonesia
- Orica Australia Pty. Ltd.
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Coastal Gujarat Power Limited - India
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- Meenaskhi Energy Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Toyota Tsusho Corporation, Japan
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Bulk Trading Sa - Switzerland
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- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Commonwealth Bank - Australia
- Cement Manufacturers Association - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- McConnell Dowell - Australia
- Indogreen Group - Indonesia
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Leighton Contractors Pty Ltd - Australia
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Madhucon Powers Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Larsen & Toubro Limited - India
- London Commodity Brokers - England
- South Luzon Thermal Energy Corporation
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Agrawal Coal Company - India
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Timah Investasi Mineral - Indoneisa
- Kumho Petrochemical, South Korea
- Anglo American - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
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- Interocean Group of Companies - India
- Parry Sugars Refinery, India
- PTC India Limited - India
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
- Eastern Energy - Thailand
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