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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, 11 March 20
SHIPPING MARKET INSIGHT - INTERMODAL
On the 4th of September the Baltic Dry Index marked its highest level for 2019, reaching 2,518 points, while the rest of the dry indices also recor ...
Tuesday, 10 March 20
SHIPPING MARKET ANALYSIS
It might be already overstated, but it seems to be important to point out once again how peculiar the current circumstances are.
Before the st ...
Tuesday, 10 March 20
EIA FORECASTS U.S ELECTRIC POWER SECTOR DEMAND FOR COAL WILL FALL BY 81 MMST (15%) IN 2020
EIA forecasts that U.S. coal production will total 595 million short tons (MMst) in 2020, down 95 MMst (14%) from 2019. According to EIA's Shor ...
Tuesday, 10 March 20
CORONAVIRUS: DEMAND DOWNGRADES FOR BULK COMMODITIES - WOOD MACKENZIE
The coronavirus outbreak is a rapidly evolving news story – and a real wildcard for bulks demand. Our global experts are monitoring the impac ...
Tuesday, 10 March 20
CHINA'S COAL-RICH PROVINCE ENSURES ENERGY SUPPLY AMID EPIDEMIC - XINHUA
China’s coal-rich province of Shanxi has seen more than 500 coal mines resume production in February, which ensured energy supply amid the ou ...
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- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Globalindo Alam Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Commonwealth Bank - Australia
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Minerals Council of Australia
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Makarim & Taira - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- VISA Power Limited - India
- SMC Global Power, Philippines
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- GAC Shipping (India) Pvt Ltd
- ICICI Bank Limited - India
- Madhucon Powers Ltd - India
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- IEA Clean Coal Centre - UK
- Iligan Light & Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- Parry Sugars Refinery, India
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Borneo Indobara - Indonesia
- Ministry of Finance - Indonesia
- Siam City Cement - Thailand
- Bharathi Cement Corporation - India
- Planning Commission, India
- Tamil Nadu electricity Board
- Indian Energy Exchange, India
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- GMR Energy Limited - India
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- Semirara Mining Corp, Philippines
- Bangladesh Power Developement Board
- Wood Mackenzie - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Meralco Power Generation, Philippines
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Kohat Cement Company Ltd. - Pakistan
- Eastern Coal Council - USA
- South Luzon Thermal Energy Corporation
- Ceylon Electricity Board - Sri Lanka
- Georgia Ports Authority, United States
- Petron Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Binh Thuan Hamico - Vietnam
- Xindia Steels Limited - India
- ASAPP Information Group - India
- SN Aboitiz Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- Meenaskhi Energy Private Limited - India
- Malabar Cements Ltd - India
- Port Waratah Coal Services - Australia
- Thiess Contractors Indonesia
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Singapore Mercantile Exchange
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- India Bulls Power Limited - India
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- The Treasury - Australian Government
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Timah Investasi Mineral - Indoneisa
- Ministry of Mines - Canada
- Coastal Gujarat Power Limited - India
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- Economic Council, Georgia
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- IHS Mccloskey Coal Group - USA
- CIMB Investment Bank - Malaysia
- Siam City Cement PLC, Thailand
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Oldendorff Carriers - Singapore
- CNBM International Corporation - China
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- The State Trading Corporation of India Ltd
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- Lanco Infratech Ltd - India
- Uttam Galva Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- Savvy Resources Ltd - HongKong
- Vedanta Resources Plc - India
- Gujarat Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- PNOC Exploration Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chamber of Mines of South Africa
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- Central Electricity Authority - India
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Coal and Oil Company - UAE
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vizag Seaport Private Limited - India
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