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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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Sunday, 26 January 20
SHIPPING NEEDS TO PREPARE FOR CORONAVIRUS RESTRICTIONS WARNS HILL DICKINSON
The shipping industry needs to be prepared for potential restrictions in order to prevent the further spread of the ‘Wuhan’ coronavirus ...
Friday, 24 January 20
LOW-SULPHUR FUEL OIL PRICES DROP USD 99 PER MT IN SINGAPORE - BIMCO
Singapore has seen one of the largest drops in the price of Very Low Sulphur Fuel Oil (VLSFO), which peaked on 7 January 2020 at USD 740 per metric ...
Friday, 24 January 20
CHINA'S BENCHMARK POWER COAL PRICE REMAINED FLAT DURING THE PAST WEEK - XINHUA
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of coal prices in north China’s major ports, stood at 553 yuan (about 80.1 U.S. dollars) ...
Thursday, 23 January 20
PANAMAX: ANOTHER DISAPPOINTING WEEK IN BOTH THE ATLANTIC AND THE PACIFIC BASIN - FEARNLEYS
Cape Size
From bad to worse for the biggest ships as prices for low-sulphur fuel oil remain high whilst freight rates deteriorate further. Aver ...
Thursday, 23 January 20
AFRICAN POWER PLATFORM PUBLISHES REPORTS ON POWER SECTOR FRAMEWORK FOR SELECTED AFRICAN COUNTRIES
Press Release: African Power Platform publishes Reports on Power Sector Framework for selected African Countries
With the repo ...
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- Grasim Industreis Ltd - India
- Mercuria Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Economic Council, Georgia
- ASAPP Information Group - India
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- VISA Power Limited - India
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- PowerSource Philippines DevCo
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Central Java Power - Indonesia
- Coalindo Energy - Indonesia
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Standard Chartered Bank - UAE
- Thiess Contractors Indonesia
- Global Coal Blending Company Limited - Australia
- Meralco Power Generation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- White Energy Company Limited
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- Star Paper Mills Limited - India
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Savvy Resources Ltd - HongKong
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- The State Trading Corporation of India Ltd
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GMR Energy Limited - India
- Toyota Tsusho Corporation, Japan
- Commonwealth Bank - Australia
- Maharashtra Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Sree Jayajothi Cements Limited - India
- Xindia Steels Limited - India
- Videocon Industries ltd - India
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Salva Resources Pvt Ltd - India
- Bangladesh Power Developement Board
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Minerals Council of Australia
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Mercator Lines Limited - India
- Chettinad Cement Corporation Ltd - India
- Georgia Ports Authority, United States
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Australian Commodity Traders Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Attock Cement Pakistan Limited
- Electricity Authority, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- GAC Shipping (India) Pvt Ltd
- Siam City Cement - Thailand
- Australian Coal Association
- Goldman Sachs - Singapore
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- Price Waterhouse Coopers - Russia
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Larsen & Toubro Limited - India
- New Zealand Coal & Carbon
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- MS Steel International - UAE
- Posco Energy - South Korea
- Neyveli Lignite Corporation Ltd, - India
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- AsiaOL BioFuels Corp., Philippines
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- GVK Power & Infra Limited - India
- Bukit Makmur.PT - Indonesia
- CNBM International Corporation - China
- SMG Consultants - Indonesia
- Kobexindo Tractors - Indoneisa
- Marubeni Corporation - India
- International Coal Ventures Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Kapuas Tunggal Persada - Indonesia
- Central Electricity Authority - India
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- The University of Queensland
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Medco Energi Mining Internasional
- Orica Australia Pty. Ltd.
- Interocean Group of Companies - India
- Carbofer General Trading SA - India
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Renaissance Capital - South Africa
- Kartika Selabumi Mining - Indonesia
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- LBH Netherlands Bv - Netherlands
- Romanian Commodities Exchange
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- The Treasury - Australian Government
- Kalimantan Lumbung Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Asmin Koalindo Tuhup - Indonesia
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Planning Commission, India
- Heidelberg Cement - Germany
- European Bulk Services B.V. - Netherlands
- Globalindo Alam Lestari - Indonesia
- Antam Resourcindo - Indonesia
- Gujarat Sidhee Cement - India
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