Argus Jet Forum Jet fuel markets and global prospects

Transcription

1 Argus Jet Forum Jet fuel markets and global prospects Louise Burke, VP Business Development 1 November 2016, Tokyo London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Market Reporting Consulting Events

2 Argus Media: global, market-focused, independent World s largest independently held energy markets PRA 600 staff, 23 countries Publish > 8,000 daily commodity price assessments + energy market intelligence Recent acquisitions DeWitt, JJ&A (Petrochemicals) FMB (Fertilizers) Wax Data Metal Pages, Metal Prices Services Price reporting and indexation Consulting Conferences Indexation examples Global crude oil and condensate US refined products (incl. jet fuel) Global NGL s Global Coal 2

3 Presentation overview Crude oil overview Jet fuel markets and global prospects Argus and jet fuel markets 3

4 Crude oil overview Supply abundance or not? Market Reporting Consulting Events 4

5 New players in the global crude market OPEC no longer retains the title of balancing role Geopolitical issues lack decision making US tight oil is the new swing production Products markets need to find new balances 5

6 A Look Back - Global crude oil trends Brent fell below $100 for first time in 14 months in August, November below $80 Brent has been at discounts to Dubai, makes Atlantic crude cheap for Asian markets European inventories at a 4-year high US production of light crude and condensate continuing to climb High US summertime refinery runs keep US stocks low Cushing inventories at 4-year low; below 20mn bl 6

7 A Look Ahead - Global crude oil trend 2016 Brent trading at $45/bbl. August rising from $40/bbl d Reaction to reports suggesting that producers were once again discussing a production freeze European inventories have dropped due to oilfield maintenance which will tend to support current prices US - Inventories at Cushing, OK remain high so will pressure NYMEX WTI vs. Brent spread Refinery capacity utilization ended the summer at 97% but has fallen as road fuel demand declines and production of light crude and condensate continuing to climb 7

8 Crude lower for longer Crude prices have entered a lower for longer phase But the market is starting to rebalance Brent crude ($/bl) Source: Argus Crude 8

9 US crude exports year-to-date 2016 Netherlands 2,553kbl Nicaragua 380kbl Peru 760kbl Venezuela 6,065kbl Panama 775kbl UK 543kbl France 1,152kbl Switzerland Italy 443kbl 1,557kbl Israel 770kbl China 1,000kbl Japan 2,626kbl Marshall Islands 2,082kbl Source: Argus 9

10 Global jet fuel markets and prospects Market Reporting Consulting Events 10

11 Impact of US products movements on global markets USGC is the new key products supplier globally Overall product demand impacts supply of jet All the US PADDS matter to Asia Arbitrage opportunities exist for you to increase profitability 11

12 Review of the global products market Strong gasoline demand drives refinery margins Middle distillates glut in Atlantic basin China growth engine despite slowdown US Gulf coast becomes a major product exporter Asia-Pacific and Middle East refinery expansion 12

13 US Market Reporting Consulting Events 13

14 Jet fuel production higher than

15 Gasoline and distillate inventories continue higher 15

16 Regional markets 16

17 Jet fuel prices increase late summer/fall 2016 Seasonal demand keeps jet fuel strong $/bl US Jet Fuel Prices vs. Crude Oil LLS Jet 54 Col 17

18 Strong volatility in the Atlantic Coast market 18

19 Pipeline bottleneck means move by water or import 19

20 East Coast supply routes 20

21 West Coast markets continue react to imbalance 21

22 PADD 5 US West Coast and Hawaii 22

23 90pc of West Coast imports come from South Korea 23

24 Asia-LA arbitrage 24

25 Midcontinent pressure cooker PADD 2 lacks the Gulf coast s relief valves or the east coast s demand imbalance Midcontinent refiners preserve transportation/access advantage to North American crude Jeftot contamination issue has created longer supply chain from USGC Limited supplies has caused jet fuel spikes 25

26 Midcontinent markets develop consistent premium Midcontinent premium over USGC is beyond cost of transportation, due to limited supply routes. 26

27 Other regions Market Reporting Consulting Events 27

28 Asia - Chinese refining capacity grows 266% since 2000 Capacity in thousand barrels per day (kbd) 5,407 7,165 7,865 8,399 8,722 9,479 10,30210,834 11,933 12,59813,300 14, ,805 2,892 28

29 Asia - Chinese refining activity Teakettles to play a large role in the energy balance. Teakettle refiners adding 300kbd of reforming capacity in 2016 and 2017 Crude runs averaged 10.7m bpd Jan-Sept 2016 (+1.6% y-o-y). Export quotas for gasoline, diesel and jet set at record highs for Gasoline demand forecast to grow by 8.9% per year kbd in 2016, up to 4mn bbls total by

30 Asia Capacity expansion is not only in China 2014, 2015 reductions Australia and Japan 2015, 2016 increases dominated by India and China new refining capacity in Myanmar, Vietnam, Malaysia and Pakistan 30

31 Asia Refineries have been working hard Refiners are benefitting from $45/bl crude Margins supported by gasoline, naphtha Independent Chinese refiners now running at 53% versus 44% in

32 Asia - Products inventories hit record levels in 2016 Inventories have been at record highs globally but are now expected to draw as we head into winter 32

33 Asia - Demand growth is robust China +1.7% in 1H16, but -1% in July/August 2016 India and South Korea +8% in 1H16 Japan -3.9% in 1H16 33

34 Asia Aviation fuel sales have also been strong China apparent net domestic demand kbd YTD Chinese jet exports up by 15% to 4.816mn mt to end Aug 2016 China exported 150kbd jet fuel to Europe Jan-Sept 2016 Total products demand in China rose by 4.4% Jan-Sept 2016 Forward crack curve shows new normal for jet. Previous 5 year range was $15-20/bl 34

35 Europe Refinery closures have slowed No new closures announced last year No closures last year But surplus capacity remains Atlantic basin refinery shutdowns '000 b/d Operator Refinery Region Capacity Closed Hess Port Reading USAC 65 Mar 13 Total Gonfreville NWE 111 Mar 13 Shell Hamburg-Harburg NWE 50 Mar 13 Eni Venice Mediterranean 80 Jul 13 ExxonMobil Dartmouth Atlantic Canada 89 Sep 13 Mol Mantova Mediterranean 55 Jan 14 Eni Gela Mediterranean 105 Mar 14 Murphy Milford Haven NWE 130 May 14 Total La Mede Mediterranean 160 Dec 16 Total Lindsey NWE 111 Dec 16 35

36 Europe Strong gasoline demand boosts refinery run US and European refinery runs at high levels in 2015 European production has fallen this year European refinery closures have slowed mn b/d 13 EU-16 refining Capacity (LH scale) Runs (LH scale) Utilisation (RH scale) % capacity 95 mn b/d 19 US refining Capacity (LH scale) Runs (LH scale) Utilisation (RH scale) % capacity

37 Europe - But diesel demand fails to keep up More diesel-focused refineries Diesel demand growth limited Atlantic basin diesel surplus 37

38 Argus and jet fuel markets advantage and developments Market Reporting Consulting Events 38

39 Argus provides full coverage of jet fuel price evaluation Argus is already embedded in physical and forward contracts. Financial community is seeking derivatives launch on Argus. These developments are based on increasing conversion of contracts to Argus indexation. Markets value objectivity and integrity of Argus assessments. 39

40 Argus Jet Fuels - the solution for the global jet market Global coverage and indices Asia-Pacific - Singapore / South Korea / Japan Mideast Gulf Africa Durban / West Africa FSU Moscow / Chimkent / Pavlodar Europe - Northwest Europe / Mediterranean US New York / Philadelphia / US Gulf / Tulsa / Chicago / LA / San Francisco Forward curves Deals Differentials to crude/ gasoil News and analysis 40

41 Argus refined products forward curves US Refined Products Forward Curves Includes 41 Refined Products; NYH ULSD Futures, NYH RBOB Futures 4 Jet Fuel prompt plus 3 years forward European Refined Products Forward Curves Includes 25 Refined Products; ARA Gasoil Futures 2 Jet Fuel 36 months forward Asian Refined Products Forward Curves Includes 18 Refined Products; ARA Gasoil Futures 1 Jet Fuel prompt plus 2 years 41

42 Argus Jet Fuel promotes transparency Seek information from all classes of trade in a market Publish deals done in report Encourage companies to report from back office Disciplined approach to validating information Public methodologies Criteria for each price Criteria and process for transaction exclusion Structured and articulated approach to assessing illiquid markets How we assess illiquid markets stated in methodology documents 42

43 Index liquidity and integrity are directly correlated Wide capture time (Argus) Price is aggregated and not current Price is highly resistant to manipulation Narrow capture time (Others) Price is current at the moment of capture Price is highly susceptible to manipulation Companies at the beginning of the supply chain (refiners) and at the end (airlines) are often the victims of those in the middle of the supply chain. Argus methodology protects the producer and the consumer. The other methodology can be a trader s methodology. 43

44 What does the market really look like? In the US the total market is much larger than the MOC. Gulf coast jet: only 50%. Chicago, New York and LA jet: 0%. But of the MOC deals done, only the last one sets the price. mn 2016 Q1 mn 2016 Q Total Volume (Argus) MOC Window (Platts) Total Volume (Argus) MOC Window (Platts) 44

45 Who sets your price on the US market? Airlines do not participate in the US markets significantly. Independent traders influence the buy side in the window. 5 traders are 90% of the Window volume. Traders do not have the same interests as airlines. A view of the total market is critical. Buyer MOC USGC June 15 June 2016 Seller MOC USGC June 15-June 2016 Trader Refiner Other Trader Refiner Other 45

46 Argus has a strict compliance program Argus adopted IOSCO Principles for Oil Price Reporting Agencies Best practices endorsed by global regulators Strict conflict of interest standards Annual reviews by PwC publicly available Publish assessment rationale Complaints procedures Internal compliance program More rigorous than IOSCO Validate market information received Ensure compliance with all procedures Deep examination of price reporting process 46

47 Argus contracts are growing In Asia Suppliers do offer Argus when requested (which they would have to compete against). Currently, Petronas, PTT, SPC and all Indian refiners, and some Japanese refiners will provide Argus. Lufthansa has contracts in Asia on Argus and KLM will be aggressively asking suppliers to use Argus in Asia for their 2016 tenders. National airlines such as Malaysian Airlines have requested Argus in their tenders. Global Alliances: One major airline Alliance has signed a commercial agreement for all its member airlines which allow them to request Argus in their tenders. This represents 33% of global jet demand. Other Alliances are working to negotiate commercial terms with Argus currently. 47

48 London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Copyright 2015 Argus Media Ltd. All rights reserved. 48

49 Louise Burke VP, Strategic Business Development Phone: Office: Web: New York Stay +Argusmediaplus Argus-media argusmediavideo Copyright notice Copyright 2015 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, the ARGUS logo, ARGUS MEDIA, ARGUS DIRECT, ARGUS OPEN MARKETS, AOM, FMB, DEWITT, JIM JORDAN & ASSOCIATES, JJ&A, FUNDALYTICS, METAL-PAGES, METALPRICES.COM, Argus publication titles and Argus index names are trademarks of Argus Media Limited. Disclaimer All data and other information presented (the Data ) are provided on an as is basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law. 49