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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, 12 February 20
MARKET INSIGHT - INTERMODAL
The recent Coronavirus outbreak in China has led to a global health emergency by World Health Organization and it is yet to be seen how long the ph ...
Wednesday, 12 February 20
CHANGES IN LNG MARKET COULD UNDERCUT PLANS FOR NEW JAPANESE COAL PLANTS - CLYDE RUSSELL
Reuters: Clyde Russell
The collapse in the spot price of liquefied natural gas (LNG) in Asia is a short-term phenomenon that may wel ...
Wednesday, 12 February 20
THE SHIPPING INDUSTRY SEES FREIGHT MARKETS IN A COMPLETE STATE OF COLLAPSE AS DEMAND GETS PARALYZED DUE TO CORONAVIRUS OUTBREAK - ALLIED
With China and the world still trying to contain the effects and come to terms with the Wuhan novel coronavirus outbreak, the shipping industry see ...
Wednesday, 12 February 20
WORLD STEEL PRODUCTION IN 2019 - BANCHERO COSTA
In a worrying development, global steel production slowed down considerably in the fourth quarter of 2019. In the final 3 months of 2019, total cru ...
Sunday, 09 February 20
SUPRAMAX: THE ASIAN ARENA STRUGGLED, A 50,000DWT SHIP FIXING A COAL RUN FROM EAST KALIMANTAN TO INDIA AT $2,000 - THE BALTIC BRIEFING
Capesize
The Capesize market endured another dreadful week of calamitous rate level falls, as the usual season low Q1 period combined with rece ...
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- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- AsiaOL BioFuels Corp., Philippines
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- ASAPP Information Group - India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Wilmar Investment Holdings
- Indika Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Bhushan Steel Limited - India
- Minerals Council of Australia
- McConnell Dowell - Australia
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Uttam Galva Steels Limited - India
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- SMG Consultants - Indonesia
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Samtan Co., Ltd - South Korea
- GAC Shipping (India) Pvt Ltd
- Global Coal Blending Company Limited - Australia
- Kepco SPC Power Corporation, Philippines
- Goldman Sachs - Singapore
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- Price Waterhouse Coopers - Russia
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- Mercator Lines Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- Ministry of Finance - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bhatia International Limited - India
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Indo Tambangraya Megah - Indonesia
- Kartika Selabumi Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Global Business Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Singapore Mercantile Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- TeaM Sual Corporation - Philippines
- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- Parry Sugars Refinery, India
- Indonesian Coal Mining Association
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- Maharashtra Electricity Regulatory Commission - India
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Mines - Canada
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Vedanta Resources Plc - India
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- Merrill Lynch Commodities Europe
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- IEA Clean Coal Centre - UK
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Indogreen Group - Indonesia
- Bhoruka Overseas - Indonesia
- Mintek Dendrill Indonesia
- Pendopo Energi Batubara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- India Bulls Power Limited - India
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Billiton Holdings Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Attock Cement Pakistan Limited
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Agrawal Coal Company - India
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Meralco Power Generation, Philippines
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- Malabar Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Electricity Regulatory Commission - India
- Rio Tinto Coal - Australia
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- Energy Link Ltd, New Zealand
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Makarim & Taira - Indonesia
- PNOC Exploration Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- GMR Energy Limited - India
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Parliament of New Zealand
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- Bulk Trading Sa - Switzerland
- Orica Mining Services - Indonesia
- Directorate Of Revenue Intelligence - India
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