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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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Tuesday, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
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- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Directorate Of Revenue Intelligence - India
- Renaissance Capital - South Africa
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Cement Manufacturers Association - India
- Ministry of Finance - Indonesia
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Larsen & Toubro Limited - India
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Bhatia International Limited - India
- Semirara Mining Corp, Philippines
- Global Business Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Kalimantan Lumbung Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bangladesh Power Developement Board
- Coastal Gujarat Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Manunggal Multi Energi - Indonesia
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- McConnell Dowell - Australia
- Meenaskhi Energy Private Limited - India
- Globalindo Alam Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- Siam City Cement PLC, Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Bharathi Cement Corporation - India
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Edison Trading Spa - Italy
- Indika Energy - Indonesia
- Ministry of Mines - Canada
- Indo Tambangraya Megah - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Pipit Mutiara Jaya. PT, Indonesia
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- Iligan Light & Power Inc, Philippines
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Deloitte Consulting - India
- Meralco Power Generation, Philippines
- London Commodity Brokers - England
- White Energy Company Limited
- Thai Mozambique Logistica
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Kumho Petrochemical, South Korea
- Latin American Coal - Colombia
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Gujarat Mineral Development Corp Ltd - India
- Kideco Jaya Agung - Indonesia
- Australian Coal Association
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
- CNBM International Corporation - China
- Rio Tinto Coal - Australia
- Karbindo Abesyapradhi - Indoneisa
- Parliament of New Zealand
- Kapuas Tunggal Persada - Indonesia
- Gujarat Sidhee Cement - India
- Jaiprakash Power Ventures ltd
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- Kaltim Prima Coal - Indonesia
- Borneo Indobara - Indonesia
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Coal and Oil Company - UAE
- Sical Logistics Limited - India
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- Xindia Steels Limited - India
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Standard Chartered Bank - UAE
- Uttam Galva Steels Limited - India
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Maheswari Brothers Coal Limited - India
- Bhoruka Overseas - Indonesia
- Indogreen Group - Indonesia
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- Central Electricity Authority - India
- Attock Cement Pakistan Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- Dalmia Cement Bharat India
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Ministry of Transport, Egypt
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement - Thailand
- MS Steel International - UAE
- European Bulk Services B.V. - Netherlands
- Electricity Generating Authority of Thailand
- Marubeni Corporation - India
- South Luzon Thermal Energy Corporation
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- Indonesian Coal Mining Association
- Makarim & Taira - Indonesia
- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- The University of Queensland
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Ind-Barath Power Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Salva Resources Pvt Ltd - India
- Carbofer General Trading SA - India
- Georgia Ports Authority, United States
- LBH Netherlands Bv - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Wilmar Investment Holdings
- Tamil Nadu electricity Board
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
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