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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, 04 December 19
SHIPPING MARKET INSIGHT - INTERMODAL
Dry bulk freight rates rebounded last week, a development that came as a relief following the recent negative sentiment that prevailed in the marke ...
Wednesday, 04 December 19
INDONESIA REVIEWING RULES MANDATING COAL SALES TO LOCAL BUYERS: OFFICIAL - REUTERS
Indonesia is reviewing rules that require coal miners to sell a portion of their coal to local buyers, a government official said on Monday, as sup ...
Tuesday, 03 December 19
STABILITY AND COMPATIBILITY OF VERY LOW SULPHUR FUEL OILS - GARD
In order to meet increasing restrictions on the sulphur content in marine fuel as defined by MARPOL Annex VI Regulation 14.1.3, the characteristics ...
Monday, 02 December 19
COAL PRODUCTION IN INDIA UP BY 164.58 MT IN 5 YEARS - BUSINESS LINE
Raw coal production in the country has increased from 567.77 million tons (MT) in 2013-14 to 730.35 MT in 2018-19, Union Coal and Parliamentary Aff ...
Monday, 02 December 19
OPEC PREPS FOR OIL'S 2020 BALANCING ACT - WOOD MACKENZIE
What steps should OPEC and its non-OPEC partners take to keep the market in balance in 2020? Ahead of OPEC’s meeting in Vienna on 5 and 6 Dec ...
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- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement PLC, Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Mines - Canada
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- White Energy Company Limited
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- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
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- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- Borneo Indobara - Indonesia
- Electricity Authority, New Zealand
- Tamil Nadu electricity Board
- Trasteel International SA, Italy
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- New Zealand Coal & Carbon
- Port Waratah Coal Services - Australia
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Standard Chartered Bank - UAE
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Gujarat Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- Sical Logistics Limited - India
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- Georgia Ports Authority, United States
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
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- Metalloyd Limited - United Kingdom
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- Coal and Oil Company - UAE
- London Commodity Brokers - England
- Parliament of New Zealand
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Coalindo Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The Treasury - Australian Government
- Holcim Trading Pte Ltd - Singapore
- Kepco SPC Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Mercator Lines Limited - India
- Krishnapatnam Port Company Ltd. - India
- Altura Mining Limited, Indonesia
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Maheswari Brothers Coal Limited - India
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Intertek Mineral Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Chettinad Cement Corporation Ltd - India
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- SMC Global Power, Philippines
- Malabar Cements Ltd - India
- GMR Energy Limited - India
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- Aboitiz Power Corporation - Philippines
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Price Waterhouse Coopers - Russia
- PTC India Limited - India
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- SMG Consultants - Indonesia
- Bhushan Steel Limited - India
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- MS Steel International - UAE
- Xindia Steels Limited - India
- Samtan Co., Ltd - South Korea
- Makarim & Taira - Indonesia
- Binh Thuan Hamico - Vietnam
- Global Business Power Corporation, Philippines
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Simpson Spence & Young - Indonesia
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- Economic Council, Georgia
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- Neyveli Lignite Corporation Ltd, - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Planning Commission, India
- GVK Power & Infra Limited - India
- Thai Mozambique Logistica
- Independent Power Producers Association of India
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Heidelberg Cement - Germany
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- IEA Clean Coal Centre - UK
- Madhucon Powers Ltd - India
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- CIMB Investment Bank - Malaysia
- The University of Queensland
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