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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, 11 January 20
SUPRAMAX: INDONESIA COAL RUNS, A 58,000DWT SHIP WAS RUMOURED FIXED DELIVERY KALIMANTAN, REDELIVERY WEST COAST INDIA, IN THE $4,000S - BALTIC BRIEFING
Capesize
Closing out the first full trading week of 2020, the Capesize market is struggling to gain any solid positive upward traction. Opening ...
Friday, 10 January 20
CHINA'S BENCHMARK POWER COAL PRICE REMAINS FLAT - XINHUA
China’s benchmark power coal price remains flat
China’s benchmark power coal price remained flat during the past week.
...
Thursday, 09 January 20
NEW IMO LIFEBOAT REQUIREMENTS ENTER INTO FORCE - STANDARD CLUB
KNOWLEDGE TO ELEVATE
Three new compulsory IMO resolutions entered into force on 1 January 2020. These resolutions deal with the maintenance, t ...
Thursday, 09 January 20
INDIA'S NEW EASED MINING RULES TO ENHANCE FOREIGN PARTICIPATION IN COAL SECTOR: MINISTER
India’s cabinet has eased mining laws in a bid to attract foreign players to the domestic coal sector and reduce imports of the fuel, coal mi ...
Thursday, 09 January 20
SUPRAMAX: A NUMBER OF INDONESIAN ROUND TRIPS WERE REPORTED AT BELLOW USD 5,000 PD LEVELS - FEARNLEYS
Capesize
The Capesize market has hit new low's in the first week of the new year, with the West Australia route being fixed at USD 6.6 being ...
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- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Makmur.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Grasim Industreis Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Mineral Development Corp Ltd - India
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Goldman Sachs - Singapore
- Electricity Generating Authority of Thailand
- Indika Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- White Energy Company Limited
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Cement Manufacturers Association - India
- Edison Trading Spa - Italy
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- Binh Thuan Hamico - Vietnam
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Sidhee Cement - India
- Siam City Cement PLC, Thailand
- Bharathi Cement Corporation - India
- Tata Chemicals Ltd - India
- Altura Mining Limited, Indonesia
- Ambuja Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coal and Oil Company - UAE
- OPG Power Generation Pvt Ltd - India
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Latin American Coal - Colombia
- Bukit Asam (Persero) Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Dalmia Cement Bharat India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meralco Power Generation, Philippines
- Tamil Nadu electricity Board
- Wilmar Investment Holdings
- Price Waterhouse Coopers - Russia
- Essar Steel Hazira Ltd - India
- Coalindo Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- TeaM Sual Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Malabar Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Bhatia International Limited - India
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- Videocon Industries ltd - India
- Indonesian Coal Mining Association
- Sical Logistics Limited - India
- Barasentosa Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Rashtriya Ispat Nigam Limited - India
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Vedanta Resources Plc - India
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Parry Sugars Refinery, India
- New Zealand Coal & Carbon
- Metalloyd Limited - United Kingdom
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Aditya Birla Group - India
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- Merrill Lynch Commodities Europe
- Ind-Barath Power Infra Limited - India
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Deloitte Consulting - India
- Georgia Ports Authority, United States
- Jindal Steel & Power Ltd - India
- Central Java Power - Indonesia
- The University of Queensland
- Riau Bara Harum - Indonesia
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Orica Australia Pty. Ltd.
- SMC Global Power, Philippines
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Medco Energi Mining Internasional
- Cigading International Bulk Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Coal Association
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- Sree Jayajothi Cements Limited - India
- Interocean Group of Companies - India
- Commonwealth Bank - Australia
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Holcim Trading Pte Ltd - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Alfred C Toepfer International GmbH - Germany
- Heidelberg Cement - Germany
- Ministry of Mines - Canada
- Global Business Power Corporation, Philippines
- MS Steel International - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- CNBM International Corporation - China
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- The Treasury - Australian Government
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Lanco Infratech Ltd - India
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- The State Trading Corporation of India Ltd
- Straits Asia Resources Limited - Singapore
- Orica Mining Services - Indonesia
- Kobexindo Tractors - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- PTC India Limited - India
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Thiess Contractors Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
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