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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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Friday, 07 February 20
CIL LOOKING TO TAP NON-POWER SECTORS FOR INCREMENTAL COAL, PTI REPORTED
The miner is looking to ramp up production to meet its targets for the current fiscal at a time when the economic slowdown is impacting demand for ...
Friday, 07 February 20
VIRUS - HIT CHINA MAY NEED MORE IMPORTS OF COAL. NOW COMES THE TRICKY PART - SHIPPING IT THERE: REUTERS
China’s domestic coal mines are struggling to ramp up production in the face of the ongoing coronavirus epidemic. That’s a situation th ...
Friday, 07 February 20
CORONAVIRUS IMPACTING THE GLOBAL SHIPPING INDUSTRY - BIMCO
The outbreak of the novel Coronavirus has dented market sentiment and spooked markets around the globe. When China sneezes, we all catch the flu. T ...
Thursday, 06 February 20
CAPE: WEAK SUPPLY/DEMAND RATIO THE STREETS REMAIN BLOODY FOR THE BIG SHIPS - FEARNLEYS
Cape: With still a weak supply/demand ratio the streets remain bloody for the big ships, and actual spot earnings are close to zero on main short-h ...
Thursday, 06 February 20
CHINESE DEMAND KEY UNCERTAINTY FOR SEABORNE COAL MARKET IN 2020 - THE BRICS POST
Coal trader Noble Resources head of research Rodrigo Echeverri Cardozo had penciled in a 3 Mt drop in Chinese import demand for 2020, but it could ...
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- Star Paper Mills Limited - India
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- Petrochimia International Co. Ltd.- Taiwan
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- Coal and Oil Company - UAE
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- Chamber of Mines of South Africa
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- Sindya Power Generating Company Private Ltd
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- Indian Oil Corporation Limited
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- CNBM International Corporation - China
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- Semirara Mining Corp, Philippines
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- Economic Council, Georgia
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- Aditya Birla Group - India
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- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
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- Parliament of New Zealand
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- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- Ministry of Transport, Egypt
- Heidelberg Cement - Germany
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
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- Sinarmas Energy and Mining - Indonesia
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
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- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Singapore Mercantile Exchange
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- Independent Power Producers Association of India
- Larsen & Toubro Limited - India
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
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- Chettinad Cement Corporation Ltd - India
- Vedanta Resources Plc - India
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- Electricity Generating Authority of Thailand
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- IHS Mccloskey Coal Group - USA
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- Tamil Nadu electricity Board
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- Australian Commodity Traders Exchange
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- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
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- Bangladesh Power Developement Board
- New Zealand Coal & Carbon
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- Planning Commission, India
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- Energy Link Ltd, New Zealand
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Medco Energi Mining Internasional
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- Mjunction Services Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- Carbofer General Trading SA - India
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dalmia Cement Bharat India
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Sakthi Sugars Limited - India
- The Treasury - Australian Government
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- Vizag Seaport Private Limited - India
- Sojitz Corporation - Japan
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- Australian Coal Association
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- Petron Corporation, Philippines
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- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Siam City Cement - Thailand
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- Attock Cement Pakistan Limited
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- Trasteel International SA, Italy
- Oldendorff Carriers - Singapore
- Global Coal Blending Company Limited - Australia
- Kartika Selabumi Mining - Indonesia
- Directorate Of Revenue Intelligence - India
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