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Friday, 20 March 20
VOLATILITY TO INCREASE IN TANKER MARKET FOLLOWING OIL PRICE WAR - DREWRY
Crude oil prices plunged by more than a third in the past week after OPEC+ failed to agree on production cut as demand softened in the aftermath of coronavirus (COVID-19). In its recent report, the IEA estimates global oil demand at 99.9 mbpd in 2020, which is around 90,000 bpd lower than in 2019 and a sharp downgrade from the agency’s forecast in February, which predicted global oil demand will grow 825,000 bpd in 2020.
The market expected OPEC+ to cut supply as the COVID-19 epidemic has spread from China to Europe, the Americas and Middle East. However, the negotiations failed due to strong resistance from Russia, which is of the view that the policy of capping production by OPEC+ producers to support the oil price is facilitating the development of US shale oil, with Russia losing its market share to increasing exports from the US.
After the failure of production cut talks in Vienna, Saudi Arabia started a price war by slashing the official selling prices for crude for key buyers in the international market and hinted at raising crude oil production to full capacity of 12.3 mbpd from April 2020. The ‘shock and awe’ tactics of Saudi Arabia could be a move to impose maximum pain in the quickest possible way to Russia and other producers, in an effort to renegotiate the proposed production cut and then quickly reverse the production surge and thereafter implement the production cut if a deal is reached.
However, the recent move by Saudi Arabia could lead to:
a) Renegotiation on a production cut between OPEC and Russia
b) Prolonged price war between OPEC, Russia and US producers
If there are fresh negotiations to implement a production cut by OPEC+ producers to accommodate the effect of declining oil demand, crude oil prices are expected to normalise.
But if there is a prolonged price war between Saudi Arabia, Russia and US shale oil producers, lower crude oil prices will lead to some improvement in global oil demand and refinery runs. At the same time, onshore stocking activity will also increase, especially in countries such as China as they build their Strategic Petroleum Reserve. A global supply glut is also likely to lead to an increase in floating storage especially among oil producers.
At the same time, sustained weakness in oil prices will eventually hurt US shale oil producers because of their relatively higher cost of production. In such circumstances, the market share of Middle Eastern crude will increase at the expense of US crude.
Meanwhile, tanker rates surged due to a sudden increase in VLCC chartering from Bahri, Saudi Arabia’s national shipping arm. Bahri fixed at least 18 VLCCs since the Kingdom aims to pump more crude into the market as its price war with Russia escalates. The VLCC earnings on Middle East–China (TD3C) route skyrocketed to $166,000pd on 11 March from $30,300pd on 06 March.
If Saudi Arabia manages to strike a deal with Russia to cut production in the short term, tanker rates will plummet to the pre-price war levels because of the ongoing weakness in crude oil trade on account of the spread of COVID-19 globally. On the other hand, if there is a prolonged price war, tonnage demand will rise initially with the increase in oil demand and stocking activity, which in turn will keep freight rates above pre-price war levels.
However, once sustained weakness in oil prices starts hurting US crude production, Middle Eastern crude will start displacing US crude in Asia. This in turn will squeeze tonne-mile demand for tankers as the distance between the US to Asia is almost double the distance between the Middle East to Asia. Thus we estimate that every barrel per day of annual decline in US exports to Asia at the expense of the Middle East will lead to about a 2.5% decline in overall tonne-mile demand for tankers. Freight rates in such a situation will plunge below the pre-price war levels.
Source: Drewry
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Tuesday, 18 February 20
CORONAVIRUS AND ITS IMPACT ON YOUR CONTRACT - CAN YOU RELY ON 'FORCE MAJEURE'? - INCE
KNOWLEDGE TO ELEVATE
On 30 January 2020, the World Health Organization (WHO) declared that the outbreak of the Novel Coronavirus (officially t ...
Monday, 17 February 20
IMO-2020 SULPHUR CAP - ISSUES TO CONSIDER PRIOR TO THE IMPLEMENTATION OF THE CARRIAGE BAN ON 1 MARCH 2020 - STANDARD CLUB
With the IMO 2020 global sulphur cap now in force, members should bear in mind another significant date in relation to the ‘carriage ban&rsqu ...
Monday, 17 February 20
COVID-19: THE EFFECT OF THIS PUBLIC HEALTH EMERGENCY ON CHARTERPARTY TERMS - GARD
KNOWLEDGE TO ELEVATE
Is it useful to compare the COVID-19 with earlier disease outbreaks?
A comparison with the Ebola outbreak ...
Saturday, 15 February 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - REUTERS
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Saturday, 15 February 20
CHEN ZHIDA: NOVEL CORONAVIRUS - IMPLICATIONS FOR CHARTERPARTIES - SHIPOWNERS' CLUB
KNOWLEDGE TO ELEVATE
Last month, the Club issued a bulletin on the 2019 Novel Coronavirus (COVID-19) which explained the origin of the virus a ...
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- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Kaltim Prima Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Straits Asia Resources Limited - Singapore
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- The University of Queensland
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- ASAPP Information Group - India
- Singapore Mercantile Exchange
- Xindia Steels Limited - India
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Anglo American - United Kingdom
- Aditya Birla Group - India
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- SMG Consultants - Indonesia
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Eastern Energy - Thailand
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Deloitte Consulting - India
- Wilmar Investment Holdings
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- McConnell Dowell - Australia
- Eastern Coal Council - USA
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Globalindo Alam Lestari - Indonesia
- Mercator Lines Limited - India
- Baramulti Group, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Barasentosa Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Ministry of Transport, Egypt
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Trasteel International SA, Italy
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- New Zealand Coal & Carbon
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Indika Energy - Indonesia
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- White Energy Company Limited
- Interocean Group of Companies - India
- Kapuas Tunggal Persada - Indonesia
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Australian Coal Association
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- International Coal Ventures Pvt Ltd - India
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- Directorate Of Revenue Intelligence - India
- Medco Energi Mining Internasional
- Ind-Barath Power Infra Limited - India
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- London Commodity Brokers - England
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Petron Corporation, Philippines
- Meralco Power Generation, Philippines
- Australian Commodity Traders Exchange
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Marubeni Corporation - India
- MS Steel International - UAE
- Mercuria Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Central Java Power - Indonesia
- Pendopo Energi Batubara - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- Bayan Resources Tbk. - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Ceylon Electricity Board - Sri Lanka
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Therma Luzon, Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- Indian Oil Corporation Limited
- Posco Energy - South Korea
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- PTC India Limited - India
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Salva Resources Pvt Ltd - India
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Bhushan Steel Limited - India
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- South Luzon Thermal Energy Corporation
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Coalindo Energy - Indonesia
- Independent Power Producers Association of India
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