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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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Thursday, 30 January 20
CAPE: WITH CHINESE NEW YEAR TAKING PLACE, THE RATES ARE REACHING FURTHER DISAPPOINTING LEVELS - FEARNLEYS
Cape
With Chinese New Year taking place, the rates are reaching further disappointing levels. Present TC average is below USD 4,500, off 24% fr ...
Wednesday, 29 January 20
INDONESIA REMAINS AT THE TOP SPOT IN 2019 AS THE LARGEST SUPPLIER OF COAL TO INDIA WITH 91.3 MLN TONNES - BANCHERO COSTA
Despite repeated promises from India’s government to reduce the country’s coal imports and increase domestic self-reliance, volumes jus ...
Wednesday, 29 January 20
MARKET INSIGHT - INTERMODAL
Last week Libya’s oil production operations were disrupted as it was reported that local Libyan tribes interrupted output at the the El Feel ...
Tuesday, 28 January 20
INDONESIA - UNCERTAINTY OVER AVAILABILITY OF LSFO - THE STANDARD CLUB
The club has received reports that low sulphur fuel is not currently readily available in all Indonesian ports and that there are local shortages.
...
Sunday, 26 January 20
SUPRAMAX: THE ASIAN BASIN SAW A 56,000DWT SHIP FIXING DELIVERY SAMARINDA TRIP TO WEST COAST INDIA AT $4,750 - BALTIC BRIEFING
Capesize
The market endured heavy losses throughout the past week, with the Capesize 5TC dropping from $8,352 to $4,772. In the lead up to Chin ...
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- Global Green Power PLC Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Bhoruka Overseas - Indonesia
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Toyota Tsusho Corporation, Japan
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- SMC Global Power, Philippines
- Straits Asia Resources Limited - Singapore
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Planning Commission, India
- Rio Tinto Coal - Australia
- Altura Mining Limited, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Ind-Barath Power Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Parliament of New Zealand
- Coalindo Energy - Indonesia
- Bharathi Cement Corporation - India
- Chettinad Cement Corporation Ltd - India
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- Price Waterhouse Coopers - Russia
- Iligan Light & Power Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wilmar Investment Holdings
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Parry Sugars Refinery, India
- Simpson Spence & Young - Indonesia
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- International Coal Ventures Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- Samtan Co., Ltd - South Korea
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Aboitiz Power Corporation - Philippines
- Orica Australia Pty. Ltd.
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- Indika Energy - Indonesia
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Videocon Industries ltd - India
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- San Jose City I Power Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- South Luzon Thermal Energy Corporation
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Africa Commodities Group - South Africa
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- McConnell Dowell - Australia
- Merrill Lynch Commodities Europe
- London Commodity Brokers - England
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indo Tambangraya Megah - Indonesia
- Australian Coal Association
- Indian Oil Corporation Limited
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bhatia International Limited - India
- Indogreen Group - Indonesia
- Chamber of Mines of South Africa
- Neyveli Lignite Corporation Ltd, - India
- Timah Investasi Mineral - Indoneisa
- Malabar Cements Ltd - India
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- PTC India Limited - India
- Independent Power Producers Association of India
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Mintek Dendrill Indonesia
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bhushan Steel Limited - India
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Georgia Ports Authority, United States
- Eastern Energy - Thailand
- Orica Mining Services - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Thiess Contractors Indonesia
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
- Mjunction Services Limited - India
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ministry of Mines - Canada
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Jaiprakash Power Ventures ltd
- Sindya Power Generating Company Private Ltd
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Maheswari Brothers Coal Limited - India
- Essar Steel Hazira Ltd - India
- Larsen & Toubro Limited - India
- Oldendorff Carriers - Singapore
- MS Steel International - UAE
- Pendopo Energi Batubara - Indonesia
- PNOC Exploration Corporation - Philippines
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Mercator Lines Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- Agrawal Coal Company - India
- Kapuas Tunggal Persada - Indonesia
- Cement Manufacturers Association - India
- Semirara Mining Corp, Philippines
- Savvy Resources Ltd - HongKong
- Metalloyd Limited - United Kingdom
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Meralco Power Generation, Philippines
- Star Paper Mills Limited - India
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Marubeni Corporation - India
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Indian Energy Exchange, India
- ASAPP Information Group - India
- Siam City Cement PLC, Thailand
- Tamil Nadu electricity Board
- Tata Chemicals Ltd - India
- Directorate Of Revenue Intelligence - India
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Coastal Gujarat Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Antam Resourcindo - Indonesia
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Kepco SPC Power Corporation, Philippines
- The State Trading Corporation of India Ltd
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