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Wednesday, 29 April 20
OIL CLOSES IN ON PEAK OVERSUPPLY - WOOD MACKENZIE
Are we now deep in the abyss? Up to our necks in it, if the oil price is any guide. Brent has now tested sub-US$20/bbl in this downturn and WTI sub-zero, albeit briefly and in somewhat freakish circumstances. Where are the signs of stress across the oil value chain? And what are the prospects of finding an exit route to recovery? I talked it through with Ann-Louise Hittle of our Macro Oils team.
First, oil demand, which we think may be close to bottoming out. Decline has been sharp and deep as Covid-19 takes its toll on global economic activity. Much of the world is currently in lockdown, with more than 65% of the world’s population under travel restrictions. Global air travel and car use have nosedived in many countries. The big hit has been on jet fuel demand (down 50% year-on-year) and gasoline (down 25%). Diesel and fuel oil – used to transport goods by truck, ship and rail – have held relatively steady.
The net effect will be April’s demand falling by an average of 15 million to 18 million b/d year on year, based on the early April forecast from our Macro Oils Service. It’s a big number but may be bigger still on certain days or weeks in April and May. Some estimates have suggested declines of 20 million b/d or more.
A key question is when the global economic recovery that’s needed to kick start oil demand growth again will begin. Right now, we appear to be in limbo. India, France and the UK, among other big economies, have extended lockdowns into May. Italy, Spain, Austria and others have started to ease restrictions while several US states are considering re-opening in May. There are early signs of US gasoline demand stabilising.
China though is the model to watch as it emerges from lockdown. It has already started ratcheting up crude purchases in April to supply a reviving economy.
Second, inventory is building at superfast rates globally. Cushing, Oklahoma, is a microcosm of the wider picture. Oil prices in Texas have incentivised producers to send crude to the Cushing hub; weak demand from refineries in the Mid-West and Gulf Coast have kept it there. Storage tanks are filling up rapidly – the three largest weekly builds on record were in consecutive weeks from late March, based on Genscape’s proprietary twice-weekly tank monitoring.
Cushing’s tightening storage capacity played a central role in WTI’s ignominious dive into negative prices on 20 April, ahead of the May contract expiry. Traders and financial players were effectively ambushed – having to pay counterparties up to US$37/bbl to roll out of their expiring May contracts and into June.
Storage globally will stay tight so long as oversupply persists. Genscape estimates Cushing‘s spare capacity of up to 15 million b/d will be full within weeks, and other landlocked hubs – the Caspian for one – are in a similar position. But in reality, producers everywhere are worried their crude won’t be able to find a home.
Third, the world is still awash with supply, which unlike demand is still close to pre-crisis levels. Low prices have killed off new investment but have not yet had much impact on production. So far, we estimate barely one million b/d of onstream non-OPEC production has been shut in.
These are sizeable volumes but, given the scale of the market oversupply, insignificant. We estimate over 15 million b/d of production generates negative operating cash flow, now that prices have lurched lower. As storage fills up, more wells and fields will be shut-in during the coming weeks. Curtailed volumes will quickly mount up.
What must happen for the oil market to start rebalancing and prices to recover? May is important for supply, with OPEC+ cuts taking effect and removing up to 7 million b/d from the market by the end of the month. We expect a slow return to “normal” life in H2 2020 to help demand recover, though most likely staying below pre-crisis levels.
A strong bounce in demand as the world emerges from recession will be needed to soak up the overhang of inventory, which threatens to reach record levels by summer. Nothing, however, can be taken for granted while coronavirus still poses a threat to economic – and social – activity.
Source: Wood Mackenzie
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Thursday, 16 April 20
MARKET INSIGHT - INTERMODAL
As everyone anticipated the results of the OPEC + G20 meeting last week, it was very interesting to watch the reaction of tanker rates that were in ...
Monday, 13 April 20
SUPRAMAX: A 56,000DWT SHIP WAS FIXED DELIVERY PARADIP, REDELIVERY CHINA, AT $4,700 - BALTIC BRIEFING
Capesize
The Capesize market this past week looks to have come off life support and found some improved sentiment. The week began rather ordina ...
Saturday, 11 April 20
FAQ: COVID-19 AND CLUB COVER - UK P&I
KNOWLEDGE TO ELEVATE
The Coronavirus (COVID-19) pandemic has generated a significant number of enquiries and questions from Members in recent ...
Saturday, 11 April 20
KOEN POWER PLANTS INVITED BIDS FOR 1.5 -1.62 MMT OF STEAM COAL
COALspot.com: South Korea’s KOREA SOUTH-EAST POWER CO., LTD. (KOEN) has issued an international tender for 1,500,000-1,620,000 Metric Tons (M ...
Friday, 10 April 20
INDIA'S BULKS SUPPLY CHAIN TAKES A HIT DURING LOCKDOWN - WOOD MACKENZIE
India is under a three-week lockdown from 25 March to contain the spread of the coronavirus outbreak. Businesses are shut, and the supply chain is ...
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- Gujarat Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Energy Development Corp, Philippines
- Iligan Light & Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- VISA Power Limited - India
- Gujarat Sidhee Cement - India
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- PowerSource Philippines DevCo
- Sindya Power Generating Company Private Ltd
- Borneo Indobara - Indonesia
- Indo Tambangraya Megah - Indonesia
- Medco Energi Mining Internasional
- Sakthi Sugars Limited - India
- Global Business Power Corporation, Philippines
- Singapore Mercantile Exchange
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- SMG Consultants - Indonesia
- MS Steel International - UAE
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- Renaissance Capital - South Africa
- Uttam Galva Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Metalloyd Limited - United Kingdom
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Bulk Trading Sa - Switzerland
- Salva Resources Pvt Ltd - India
- Siam City Cement - Thailand
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- Heidelberg Cement - Germany
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- GN Power Mariveles Coal Plant, Philippines
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- India Bulls Power Limited - India
- Posco Energy - South Korea
- Bhoruka Overseas - Indonesia
- Attock Cement Pakistan Limited
- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Central Java Power - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Coastal Gujarat Power Limited - India
- Thiess Contractors Indonesia
- Ceylon Electricity Board - Sri Lanka
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Australian Commodity Traders Exchange
- Energy Link Ltd, New Zealand
- SMC Global Power, Philippines
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
- Interocean Group of Companies - India
- Central Electricity Authority - India
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Semirara Mining Corp, Philippines
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- London Commodity Brokers - England
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Merrill Lynch Commodities Europe
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Essar Steel Hazira Ltd - India
- Ministry of Finance - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- Semirara Mining and Power Corporation, Philippines
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- CIMB Investment Bank - Malaysia
- Kideco Jaya Agung - Indonesia
- Planning Commission, India
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Goldman Sachs - Singapore
- Independent Power Producers Association of India
- Ministry of Transport, Egypt
- Ministry of Mines - Canada
- Bayan Resources Tbk. - Indonesia
- The Treasury - Australian Government
- Rio Tinto Coal - Australia
- Wood Mackenzie - Singapore
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Lanco Infratech Ltd - India
- Pendopo Energi Batubara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Port Waratah Coal Services - Australia
- Directorate Of Revenue Intelligence - India
- Carbofer General Trading SA - India
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Antam Resourcindo - Indonesia
- Indogreen Group - Indonesia
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- Bhushan Steel Limited - India
- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Global Green Power PLC Corporation, Philippines
- Larsen & Toubro Limited - India
- Anglo American - United Kingdom
- Power Finance Corporation Ltd., India
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Xindia Steels Limited - India
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Georgia Ports Authority, United States
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Thai Mozambique Logistica
- IHS Mccloskey Coal Group - USA
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- White Energy Company Limited
- Kartika Selabumi Mining - Indonesia
- Kumho Petrochemical, South Korea
- Mintek Dendrill Indonesia
- Coalindo Energy - Indonesia
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