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