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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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Wednesday, 25 March 20
MARKET INSIGHT - INTERMODAL
There is no doubt that the Covid-19 pandemic crisis is a world-shattering event that will change the world as we know it. Societies are facing chal ...
Wednesday, 25 March 20
INDONESIA TO CANCEL RULES REQUIRING DOMESTIC SHIPS FOR COAL, PALM EXPORTS : REFINITIV
Indonesia's government will revoke rules requiring exporters of coal and palm oil to use domestic shipping companies for shipments, Coordinatin ...
Wednesday, 25 March 20
JAN-FEB 2020, INDONESIA SHIPPED 64.5 MLN TONNES OF COAL, UP +3.4% YOY - BANCHERO COSTA
In the 12 months of calendar 2019, Indonesia exported 386.4 mln tonnes of coal, according to vessel tracking data from Refinitiv. This represents a ...
Tuesday, 24 March 20
MARKET ANALYSIS - ALLIED
As countries around the world struggle to take back control of the ongoing COVID-19 pandemic the global economy shuts down bit by bit, leaving only ...
Tuesday, 24 March 20
THE TRIPLE SHOCK OF CORONAVIRUS IN SHIPPING: WILL IT LAST? - DREWRY
Transport capacity shortages, disruptions to supply chains and inability to plan since late January have been a dangerous combination. But will all ...
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- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- Borneo Indobara - Indonesia
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Meralco Power Generation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Attock Cement Pakistan Limited
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- McConnell Dowell - Australia
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- ASAPP Information Group - India
- PetroVietnam Power Coal Import and Supply Company
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- Dalmia Cement Bharat India
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Central Java Power - Indonesia
- Sojitz Corporation - Japan
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- India Bulls Power Limited - India
- Commonwealth Bank - Australia
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- Ministry of Mines - Canada
- Xindia Steels Limited - India
- Coal and Oil Company - UAE
- Holcim Trading Pte Ltd - Singapore
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- Mjunction Services Limited - India
- Sakthi Sugars Limited - India
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- Bhoruka Overseas - Indonesia
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- PowerSource Philippines DevCo
- Altura Mining Limited, Indonesia
- Indian Oil Corporation Limited
- Maharashtra Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- The University of Queensland
- Tata Chemicals Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- CNBM International Corporation - China
- Economic Council, Georgia
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Global Business Power Corporation, Philippines
- Vedanta Resources Plc - India
- South Luzon Thermal Energy Corporation
- Independent Power Producers Association of India
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Interocean Group of Companies - India
- PTC India Limited - India
- Chettinad Cement Corporation Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- Savvy Resources Ltd - HongKong
- IHS Mccloskey Coal Group - USA
- Petron Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Central Electricity Authority - India
- Aditya Birla Group - India
- GMR Energy Limited - India
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- Ambuja Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- New Zealand Coal & Carbon
- Wilmar Investment Holdings
- PNOC Exploration Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Videocon Industries ltd - India
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Bhatia International Limited - India
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Bharathi Cement Corporation - India
- SMC Global Power, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Eastern Energy - Thailand
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Larsen & Toubro Limited - India
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Carbofer General Trading SA - India
- IEA Clean Coal Centre - UK
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- Planning Commission, India
- The State Trading Corporation of India Ltd
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Aboitiz Power Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Straits Asia Resources Limited - Singapore
- Cement Manufacturers Association - India
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- GVK Power & Infra Limited - India
- Standard Chartered Bank - UAE
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jindal Steel & Power Ltd - India
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Indian Energy Exchange, India
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Ind-Barath Power Infra Limited - India
- European Bulk Services B.V. - Netherlands
- Baramulti Group, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Antam Resourcindo - Indonesia
- Barasentosa Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ceylon Electricity Board - Sri Lanka
- Pendopo Energi Batubara - Indonesia
- Agrawal Coal Company - India
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Mercator Lines Limited - India
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