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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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Saturday, 15 February 20
CHEN ZHIDA: NOVEL CORONAVIRUS - IMPLICATIONS FOR CHARTERPARTIES - SHIPOWNERS' CLUB
KNOWLEDGE TO ELEVATE
Last month, the Club issued a bulletin on the 2019 Novel Coronavirus (COVID-19) which explained the origin of the virus a ...
Saturday, 15 February 20
AFRAMAX: A MORE POSITIVE ATTITUDE EXISTED IN THIS SECTOR WITH RATES IMPROVING ON ALL ROUTES - BALTIC BRIEFING
VLCC
The market in the Middle East was unmoved this week, with Chinese refiners continuing to slow imports, allied with the impact of the Coron ...
Saturday, 15 February 20
A 56,000DWT VESSEL WAS CONCLUDED BASIS DELIVERY SINGAPORE VIA INDONESIA REDELIVERY CHINA IN THE LOW $6,000S - BALTIC BRIEFING
Capesize
Riding the downward momentum of the previous week, the market was always going to be hard pressed to make any sort of revival. With mu ...
Saturday, 15 February 20
U.S. COAL PRODUCTION WILL TOTAL 595 MMST IN 2020, DOWN 14% FROM 2019 - EIA
EIA forecasts that U.S. coal production will total 595 million short tons (MMst) in 2020, down 95 MMst (14%) from 2019.
Lower ...
Friday, 14 February 20
WHY THE WORLD ECONOMY WILL BE FACING CHINA'S CORONAVIRUS FOR A LONG TIME - CNBC
Everywhere we look we see the headlines and commentators talking about the coronavirus and its impact on tourism, trade and investment between Chin ...
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- Georgia Ports Authority, United States
- Savvy Resources Ltd - HongKong
- Vizag Seaport Private Limited - India
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Posco Energy - South Korea
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Independent Power Producers Association of India
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
- Indonesian Coal Mining Association
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- Australian Coal Association
- Kobexindo Tractors - Indoneisa
- IEA Clean Coal Centre - UK
- Minerals Council of Australia
- Indian Energy Exchange, India
- Riau Bara Harum - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- AsiaOL BioFuels Corp., Philippines
- Indogreen Group - Indonesia
- Samtan Co., Ltd - South Korea
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Green Power PLC Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Global Business Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Krishnapatnam Port Company Ltd. - India
- Straits Asia Resources Limited - Singapore
- Edison Trading Spa - Italy
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Directorate Of Revenue Intelligence - India
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Sical Logistics Limited - India
- Global Coal Blending Company Limited - Australia
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- Grasim Industreis Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- Parry Sugars Refinery, India
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Xindia Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bhoruka Overseas - Indonesia
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Therma Luzon, Inc, Philippines
- CIMB Investment Bank - Malaysia
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Energy Development Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Iligan Light & Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Baramulti Group, Indonesia
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Interocean Group of Companies - India
- Simpson Spence & Young - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Ceylon Electricity Board - Sri Lanka
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Lanco Infratech Ltd - India
- Rio Tinto Coal - Australia
- Central Java Power - Indonesia
- Economic Council, Georgia
- Orica Australia Pty. Ltd.
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Altura Mining Limited, Indonesia
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- Mercator Lines Limited - India
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Sindya Power Generating Company Private Ltd
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- Goldman Sachs - Singapore
- Singapore Mercantile Exchange
- India Bulls Power Limited - India
- Kumho Petrochemical, South Korea
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- White Energy Company Limited
- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Oldendorff Carriers - Singapore
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- Wilmar Investment Holdings
- Miang Besar Coal Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- The State Trading Corporation of India Ltd
- Semirara Mining and Power Corporation, Philippines
- The Treasury - Australian Government
- Planning Commission, India
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- Kepco SPC Power Corporation, Philippines
- Trasteel International SA, Italy
- Coalindo Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Maheswari Brothers Coal Limited - India
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Bhatia International Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Energy - Thailand
- Banpu Public Company Limited - Thailand
- MS Steel International - UAE
- ASAPP Information Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- Vedanta Resources Plc - India
- PTC India Limited - India
- Aditya Birla Group - India
- Deloitte Consulting - India
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