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