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