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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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- Holcim Trading Pte Ltd - Singapore
- Parry Sugars Refinery, India
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- PNOC Exploration Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Bhushan Steel Limited - India
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Carbofer General Trading SA - India
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- Heidelberg Cement - Germany
- Indian Energy Exchange, India
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Aditya Birla Group - India
- Formosa Plastics Group - Taiwan
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Posco Energy - South Korea
- Indo Tambangraya Megah - Indonesia
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- GN Power Mariveles Coal Plant, Philippines
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Sakthi Sugars Limited - India
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- Renaissance Capital - South Africa
- Minerals Council of Australia
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Bhatia International Limited - India
- Toyota Tsusho Corporation, Japan
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Anglo American - United Kingdom
- Bulk Trading Sa - Switzerland
- Orica Australia Pty. Ltd.
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Petron Corporation, Philippines
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- GVK Power & Infra Limited - India
- Power Finance Corporation Ltd., India
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- Maheswari Brothers Coal Limited - India
- Sarangani Energy Corporation, Philippines
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Directorate Of Revenue Intelligence - India
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Kaltim Prima Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Semirara Mining and Power Corporation, Philippines
- ICICI Bank Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Alfred C Toepfer International GmbH - Germany
- PTC India Limited - India
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Cement Manufacturers Association - India
- Coastal Gujarat Power Limited - India
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Trasteel International SA, Italy
- Tamil Nadu electricity Board
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Mining Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- ASAPP Information Group - India
- Kohat Cement Company Ltd. - Pakistan
- Vijayanagar Sugar Pvt Ltd - India
- Ambuja Cements Ltd - India
- Lanco Infratech Ltd - India
- Kartika Selabumi Mining - Indonesia
- Oldendorff Carriers - Singapore
- CNBM International Corporation - China
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Antam Resourcindo - Indonesia
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Essar Steel Hazira Ltd - India
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Coalindo Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Videocon Industries ltd - India
- Sical Logistics Limited - India
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Economic Council, Georgia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kalimantan Lumbung Energi - Indonesia
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Tata Chemicals Ltd - India
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Borneo Indobara - Indonesia
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