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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, 19 February 20
MINERS WELCOME INDONESIA'S NEW JOBS BILL THAT COULD SPUR COAL GROWTH - REUTERS
Miners have welcomed proposed changes to Indonesian mining rules under a new law aimed at boosting investment, though critics are concerned that th ...
Wednesday, 19 February 20
AS OCEAN TEMPERATURES RISE, SHIPOWNERS LOOK FOR WAYS TO COPE - WARTSILA
The world is heating up, and its oceans are no exception. According to the International Panel on Climate Change (IPCC), the oceans absorb the majo ...
Wednesday, 19 February 20
MARKET INSIGHT - INTERMODAL
The coronavirus outbreak is estimated to negatively affect global economy by at least EUR400bn this year, representing around the 0.4% of global GD ...
Tuesday, 18 February 20
WEEKLY MARKET ANALYSIS - ALLIED
Under such poorly performing market circumstances, many usually take the historical approach, in order to better understand and further analyze the ...
Tuesday, 18 February 20
ADARO SHIPPED 27 PERCENT OF ITS TOTAL COAL PRODUCTION IN 2019 TO INDIA AND CHINA
PT Adaro Energy Tbk (AE) produced 58.03 Mt of coal from PT Adaro Indonesia (AI), Balangan Coal Companies and Adaro Me ...
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- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- AsiaOL BioFuels Corp., Philippines
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Anglo American - United Kingdom
- Tamil Nadu electricity Board
- PetroVietnam Power Coal Import and Supply Company
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Indika Energy - Indonesia
- Economic Council, Georgia
- The Treasury - Australian Government
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- White Energy Company Limited
- Directorate Of Revenue Intelligence - India
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- Bangladesh Power Developement Board
- Directorate General of MIneral and Coal - Indonesia
- Australian Coal Association
- Electricity Authority, New Zealand
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Indogreen Group - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- OPG Power Generation Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Eastern Coal Council - USA
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- Singapore Mercantile Exchange
- Oldendorff Carriers - Singapore
- Posco Energy - South Korea
- Georgia Ports Authority, United States
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Africa Commodities Group - South Africa
- Price Waterhouse Coopers - Russia
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- GAC Shipping (India) Pvt Ltd
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Kohat Cement Company Ltd. - Pakistan
- Independent Power Producers Association of India
- Ministry of Mines - Canada
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- Dalmia Cement Bharat India
- Krishnapatnam Port Company Ltd. - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Interocean Group of Companies - India
- Latin American Coal - Colombia
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Wilmar Investment Holdings
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- PowerSource Philippines DevCo
- Coal and Oil Company - UAE
- Bukit Makmur.PT - Indonesia
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- IHS Mccloskey Coal Group - USA
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- ICICI Bank Limited - India
- SMG Consultants - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ambuja Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Indonesian Coal Mining Association
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Gujarat Sidhee Cement - India
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- Petron Corporation, Philippines
- Mjunction Services Limited - India
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Chamber of Mines of South Africa
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- VISA Power Limited - India
- Marubeni Corporation - India
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Maheswari Brothers Coal Limited - India
- Central Java Power - Indonesia
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- IEA Clean Coal Centre - UK
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Minerals Council of Australia
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Sinarmas Energy and Mining - Indonesia
- ASAPP Information Group - India
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Samtan Co., Ltd - South Korea
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Holcim Trading Pte Ltd - Singapore
- Planning Commission, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- PTC India Limited - India
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Globalindo Alam Lestari - Indonesia
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