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