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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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Monday, 03 February 20
KOWEPO INVITING BIDS FOR 2.46 MILLION TONS OF MIN.5700 AND MIN.5600 NCV COAL
COALspot.com: South Korea’s Korea Western Power Co., Ltd. (KOWEPO) has issued an international tender for total 2,460,000 tons of (Sub) Bitum ...
Sunday, 02 February 20
NOVEL CORONAVIRUS OUTBREAK IN CHINA - STANDARD CLUB
Members will be aware of the recent novel coronavirus outbreak in China, which has now been declared a global emergency by the World Health Organis ...
Sunday, 02 February 20
SUPRAMAX: A 52,000DWT SHIP WAS FIXED BASIS DELIVERY SOUTH KALIMANTAN TRIP TO INDIA, AT $6,000 - BALTIC BRIEFING
Capesize
The week proved conspicuous for all the wrong reasons. This was the week when the Baltic Capesize Index (BCI) turned negative, closing ...
Saturday, 01 February 20
50 MILLION PEOPLE QUARANTINED IN CHINA TO CONTAIN SPREAD OF CORONAVIRUS - HOW DOES IT AFFECT SHIPPING? - BIMCO
The outbreak of the novel coronavirus, declared a global health emergency by the WHO, has caused massive uncertainty across the global markets with ...
Saturday, 01 February 20
THERMAL COAL MARKETS: 5 TRENDS TO WATCH OUT FOR IN 2020 - MINING REVIEW
The seaborne thermal coal market entered the year challenged by low priced LNG in the Atlantic and rapidly increasing supply in the Pacific.
&n ...
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- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- European Bulk Services B.V. - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Ministry of Mines - Canada
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- Latin American Coal - Colombia
- Orica Mining Services - Indonesia
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Central Java Power - Indonesia
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Attock Cement Pakistan Limited
- Edison Trading Spa - Italy
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- The Treasury - Australian Government
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Metalloyd Limited - United Kingdom
- Kumho Petrochemical, South Korea
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Maheswari Brothers Coal Limited - India
- Economic Council, Georgia
- Larsen & Toubro Limited - India
- Coal and Oil Company - UAE
- GAC Shipping (India) Pvt Ltd
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Toyota Tsusho Corporation, Japan
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Alfred C Toepfer International GmbH - Germany
- Parry Sugars Refinery, India
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vedanta Resources Plc - India
- Sical Logistics Limited - India
- Aboitiz Power Corporation - Philippines
- Eastern Coal Council - USA
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- SMG Consultants - Indonesia
- Jindal Steel & Power Ltd - India
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Iligan Light & Power Inc, Philippines
- GMR Energy Limited - India
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Ministry of Finance - Indonesia
- Indogreen Group - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Coal Blending Company Limited - Australia
- CIMB Investment Bank - Malaysia
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Bangladesh Power Developement Board
- Trasteel International SA, Italy
- Bulk Trading Sa - Switzerland
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Videocon Industries ltd - India
- Global Business Power Corporation, Philippines
- Posco Energy - South Korea
- Electricity Generating Authority of Thailand
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Independent Power Producers Association of India
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- Simpson Spence & Young - Indonesia
- Chettinad Cement Corporation Ltd - India
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Miang Besar Coal Terminal - Indonesia
- The University of Queensland
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Meralco Power Generation, Philippines
- Energy Link Ltd, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Minerals Council of Australia
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Commonwealth Bank - Australia
- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- VISA Power Limited - India
- SMC Global Power, Philippines
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- Rashtriya Ispat Nigam Limited - India
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- Marubeni Corporation - India
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- CNBM International Corporation - China
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Australian Coal Association
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Semirara Mining Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Mjunction Services Limited - India
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Bhoruka Overseas - Indonesia
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
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