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European fuel oil and bunker price evolution

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Ned Molloy

Managing Editor, Fuel Oil

Copyright © 2016 by S&P Global.

All rights reserved.

Platts


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• LOW OUTRIGHT PRICE – IMPACT ON SUPPLY

• HOW IS FUEL OIL DEMAND RESPONDING?

• SOME THOUGHTS ON VOLATILITY

AGENDA


OUTRIGHT PRICE HIT 14-YEAR LOW

3

0

100

200

300

400

500

600

700

Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16

FO 3.5%S FOB Rdam Barge

Platts

$/MT


RUSSIAN FUEL OIL RAIL FEES, Rb/MT

4

0

1,000

2,000

3,000

4,000

5,000

6,000

Nov12

Feb13

May13

Aug13

Nov13

Feb14

May14

Aug14

Nov14

Feb15

May15

Aug15

Nov15

Feb16

May16

Nizhny Novgorod Refinery -Novorossiysk

Yaroslavl Refinery - StPetersburg

Kirishi Refinery-Vysotsk

Ufa Refinery-Vysotsk

Omsk Refinery-Vysotsk

Platts


REFINERY FREIGHT NETBACKS GO NEGATIVE

5

-100

-50

0

50

100

150

200

250

300

Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16

Yaroslavl Refinery via St Petersburg Netback $/MT

Moscow Refinery via St Petersburg Netback $/MT

Kirishi Refinery Via Vysotsk Netback $

Ufa Refinery Via Vysotsk Netback $/MT

Omsk Refinery Via Vysotsk Netback $/MT

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RUSSIAN EXPORTS AND DOMESTIC DELIVERIES

6

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Source: Russian Energy Ministry, Central Dispatching Unit

0

1

2

3

4

5

6

Mill

ion

MT

Feb 2015 Feb 2016 Mar 2016

Exports

Domestic use


FUEL OIL CRACKS BOUNCE IN JAN/FEB

Platts

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Jan15

Feb15

Mar15

Apr15

May15

Jun15

Jul 15 Aug15

Sep15

Oct15

Nov15

Dec15

Jan16

Feb16

Mar16

Apr16

May16

FOB Rotterdam barges vs Dated Brent, $/B


BARGE STRUCTURE REBOUNDS

Platts

-8

-7

-6

-5

-4

-3

-2

-1

0

May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16

M1 vs M2 FOB Rotterdambarge swaps

$/MT


RUSSIAN REFINERY MODERNIZATION CONTINUES

Platts

Year Refinery Owner Unit(s)

2014 Moscow Gazprom Neft Isomerization, Gasoline hydrotreater

Khabarovsk Alliance Oil Hydrocracker, Diesel hydrotreater

Kirishi Surgutneftegaz Hydrocracker

Taneco Tatneft Hydrocracker

Tuapse Rosneft CDU

Salavat Gazprom CDU

2015 Novokuybishev Rosneft Isomerization

Kuybishev Rosneft Isomerization

Volgograd Lukoil CDU

Ufa Bashneft CDU, FCC

Salavat Gazprom Isomerization

2016 Kuybishev Rosneft Alkylation, FCC, MTBE

Komsomolsk Rosneft Hydrocracker

Syzran Rosneft FCC, MTBE

Angarsk Rosneft Alkylation, FCC, MTBE

Ryazan Rosneft Isomerization

Volgograd Lukoil CDU

Perm Lukoil Coker

Nizhny Novgorod Lukoil Isomerization, FCC, Alkylation

Salavat Gazprom FCC

ULSD

+5.3 mil mt

Gasoline

+0.6 mil mt

ULSD

+0.9 mil mt

Gasoline

+1.2 mil mt

Diesel

+2.9 mil mt

Gasoline

+3.2 mil mt


RUSSIAN FUEL OIL EXPORTS IN LONG-TERM DECLINE

10

Platts

Source: Russian Energy Ministry, Central Dispatching Unit

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

March 2015 March 2016

Fuel oil exports by key producer, MT

Khabarovsk

Orsk Refinery

Taneco

TAIF-NK

Bashneft

Afipsky Refinery

Gazprom Neft

Slavneft

Surgutneftegaz

Lukoil

Rosneft


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FUEL OIL UNDERCUTS LNG

12

Platts

0

2

4

6

8

10

12

14

16

18

20

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

Aug13

Nov13

Feb14

May14

Aug14

Nov14

Feb15

May15

Aug15

Nov15

Feb16

ARA Coal$/MMBtu

LNG NWE SpotDES $/MMBtu

NorthWestEurope FO$/MMBtu


HI-LO SUBDUED AFTER 0.1% ECA CHANGE

13

-20

-10

0

10

20

30

40

50

60

70

80

Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16

Premium of 1% FOB NWE Cargoes over 3.5% FOB Rotterdam barges, $/mt

Platts


VLCC FIXTURES PER MONTH

14

0

1

2

3

4

5

6

Jan Feb Mar Apr May

VLCCs


VLCC FREIGHT CHEAPENING

15

Platts

3

4

5

6

7

Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16

Dirty UKC-Singapore 270kt Lumpsum, $


FORWARD STRUCTURE PRICING IN OVERSUPPLY

16

Platts

-4

-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

May 2016 May 2017 May 2018 May 2019 May 2020

inter-month spread


FORWARD CURVE PRICING IN LOW SULFUR DEMAND?

17

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150

170

190

210

230

250

270

290

310

May 2016 May 2017 May 2018 May 2019 May 2020

Ou

trig

ht

pri

ce, $

/MT

FOB 3.5% Rdam bargeforward curve

FOB NW 1% cargo forwardcurve


Platts





VOLATILITY SUBSIDES

19

0

10

20

30

40

50

60

70

80

90

100

0

50

100

150

200

250

02-Nov-2015 17-Dec-2015 03-Feb-2016 21-Mar-2016 05-May-2016

Vo

lati

lity

[%]

USD

/MT

Fuel Oil 3.5%S FOB Rotterdam Barge

price history volatility (22-days rolling window)

Platts


DELIVERED PREMIUMS DEPEND ON VOLATILITY?

20

Platts

0

5

10

15

20

25

30

0

100

200

300

400

500

600

700

Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16

FO 3.5%S FOBRdam Barge

380 CSTDeliveredpremium


THANK YOU

Ned Molloy

Managing Editor, Fuel Oil

+44 (0)207 176 6684

[email protected]

21

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