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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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Saturday, 18 January 20
GERMAN STEAM COAL IMPORTS IN 2019 PLUMMETED BY 17 % - COAL IMPORTERS ASSOCIATION
Press Release: According to preliminary calculations by the German Coal Importers Association (Verein der Kohlenimporteure e. V.), world trade in h ...
Saturday, 18 January 20
A 61,400 DWT FIXED FROM SOUTH EAST ASIA DELIVERY EAST KALIMANTAN REDELIVERY WEST COAST INDIA IN THE LOW $7,000S - BALTIC BRIEFING
Capesize
The market was relatively stable over this past week putting an end to the past months of more extreme declines. While the Capesize 5T ...
Friday, 17 January 20
EIA ESTIMATES THAT U.S. COAL PRODUCTION DECLINED BY 65 MMST (9%) TO 690 MMST IN 2019. IN 2020, COAL PRODUCTION WILL DECLINE BY A FURTHER 14% TO 597 MMST
U.S. Coal Supply.
EIA estimates that U.S. coal production declined by 65 million short tons (MMst) (9%) to 690 MMst in 2019. In 2020, EIA ...
Friday, 17 January 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index, a gauge of coal p ...
Thursday, 16 January 20
SUPRAMAX: INDO/CHINA ROUND VOYAGE FIXING AROUND LOW/MID USD 6,000 BSS APS INDO - FEARNLEYS
Capesize
Still very rough seas for the big ships, with the majority of the fleet trading Far East or fronthaul and consequently earning far les ...
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- Pipit Mutiara Jaya. PT, Indonesia
- Tata Chemicals Ltd - India
- Krishnapatnam Port Company Ltd. - India
- TNB Fuel Sdn Bhd - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Indo Tambangraya Megah - Indonesia
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- The University of Queensland
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Electricity Authority, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Minerals Council of Australia
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- PTC India Limited - India
- Ministry of Transport, Egypt
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Oldendorff Carriers - Singapore
- Global Green Power PLC Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- Australian Commodity Traders Exchange
- Jindal Steel & Power Ltd - India
- Meralco Power Generation, Philippines
- Wilmar Investment Holdings
- Eastern Coal Council - USA
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Price Waterhouse Coopers - Russia
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Central Electricity Authority - India
- Dalmia Cement Bharat India
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- Independent Power Producers Association of India
- IEA Clean Coal Centre - UK
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Cement Manufacturers Association - India
- Coal and Oil Company - UAE
- Metalloyd Limited - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Ambuja Cements Ltd - India
- Planning Commission, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Directorate General of MIneral and Coal - Indonesia
- Makarim & Taira - Indonesia
- Medco Energi Mining Internasional
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Economic Council, Georgia
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- Marubeni Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- CNBM International Corporation - China
- Maheswari Brothers Coal Limited - India
- Electricity Generating Authority of Thailand
- Intertek Mineral Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Kideco Jaya Agung - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- SMG Consultants - Indonesia
- White Energy Company Limited
- Ind-Barath Power Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Borneo Indobara - Indonesia
- Banpu Public Company Limited - Thailand
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Deloitte Consulting - India
- Lanco Infratech Ltd - India
- Star Paper Mills Limited - India
- Central Java Power - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Globalindo Alam Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Parry Sugars Refinery, India
- Commonwealth Bank - Australia
- Kepco SPC Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Eastern Energy - Thailand
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- MS Steel International - UAE
- Australian Coal Association
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Karaikal Port Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- SMC Global Power, Philippines
- Petron Corporation, Philippines
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Africa Commodities Group - South Africa
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- GVK Power & Infra Limited - India
- Standard Chartered Bank - UAE
- Kobexindo Tractors - Indoneisa
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Leighton Contractors Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Sical Logistics Limited - India
- Attock Cement Pakistan Limited
- Chamber of Mines of South Africa
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Mercator Lines Limited - India
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