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Asian downstream oil
Supply shocks amplify existing trends
Raising our margin forecasts
Given our view of global oil demand, stronger-than-expected year-to-date
margins and following recent supply disruptions from both Japan and the Middle
East/North Africa (MENA), we are increasing our Asian refining margin forecasts.
Our 2011E refining margin increases to US$6.7/bbl from US$6.1/bbl, and our
2012E increases to US$7.0/bbl from US$6.4/bbl.
Global demand forecast intact, destruction at higher levels
Our oil economist, Jan Stuart, is forecasting 2.5% YoY (+2.3m b/d) global
consumption growth in 2011. While demand destruction remains a primary area
of concern for most investors, our global economics team notes that an extended
period of price strength above current levels will be required to erode demand.
The Japanese earthquake: tragic and material to supply
Supply disruption estimates have varied greatly. Our Japanese downstream oil
analyst, Polina Diyachkina, notes that suspended operations represent roughly
31% of Japanese capacity, but that 17% is likely to come back on stream
quickly. However, 600k b/d of disrupted supply should be enough to push Asian
utilization rates above 90%, a level that has not been reached since 2005.
Electricity generation: oil consumption and utilization
Following nuclear outages and damages to both coal and LNG facilities, we
estimate an electricity shortfall of 10GWs, rising to 20GWs by summer. This is in
line with third-party estimates. As a result, demand for low sulphur fuel oil and
diesel is expected to eventually increase by 250-500k b/d. That, combined with
rebuilding efforts, is expected to more than offset any GDP-related slowdown in
Japanese oil consumption. Importantly, an absence of a steady and stable
power supply will also add additional refining supply pressure, in our view.
Japan: Was an active regional player
With roughly 1m bpd of imports in January, 500kbd of exports and countrywide
utilization rates of 88%, the Japanese supply disruption will be felt by the region.
Middle East adding further margin pressure in Asia
Political tension in the Middle East has resulted in losses to refining capacity and
has also restricted supply of easily refined crude. We believe spreads for lighter
crude oil should remain strong and will benefit refineries with a high degree of
complexity.
Upgrading to Thai refiners – Thai Oil and PTT remain our
preferred names
We have raised our earnings and target prices for PTT, Thai Oil, PTT Aromatics
and Esso Thailand.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asian downstream oil
Supply shocks amplify existing trends
Raising our margin forecasts
Given our view of global oil demand, stronger-than-expected year-to-date
margins and following recent supply disruptions from both Japan and the Middle
East/North Africa (MENA), we are increasing our Asian refining margin forecasts.
Our 2011E refining margin increases to US$6.7/bbl from US$6.1/bbl, and our
2012E increases to US$7.0/bbl from US$6.4/bbl.
Global demand forecast intact, destruction at higher levels
Our oil economist, Jan Stuart, is forecasting 2.5% YoY (+2.3m b/d) global
consumption growth in 2011. While demand destruction remains a primary area
of concern for most investors, our global economics team notes that an extended
period of price strength above current levels will be required to erode demand.
The Japanese earthquake: tragic and material to supply
Supply disruption estimates have varied greatly. Our Japanese downstream oil
analyst, Polina Diyachkina, notes that suspended operations represent roughly
31% of Japanese capacity, but that 17% is likely to come back on stream
quickly. However, 600k b/d of disrupted supply should be enough to push Asian
utilization rates above 90%, a level that has not been reached since 2005.
Electricity generation: oil consumption and utilization
Following nuclear outages and damages to both coal and LNG facilities, we
estimate an electricity shortfall of 10GWs, rising to 20GWs by summer. This is in
line with third-party estimates. As a result, demand for low sulphur fuel oil and
diesel is expected to eventually increase by 250-500k b/d. That, combined with
rebuilding efforts, is expected to more than offset any GDP-related slowdown in
Japanese oil consumption. Importantly, an absence of a steady and stable
power supply will also add additional refining supply pressure, in our view.
Japan: Was an active regional player
With roughly 1m bpd of imports in January, 500kbd of exports and countrywide
utilization rates of 88%, the Japanese supply disruption will be felt by the region.
Middle East adding further margin pressure in Asia
Political tension in the Middle East has resulted in losses to refining capacity and
has also restricted supply of easily refined crude. We believe spreads for lighter
crude oil should remain strong and will benefit refineries with a high degree of
complexity.
Upgrading to Thai refiners – Thai Oil and PTT remain our
preferred names
We have raised our earnings and target prices for PTT, Thai Oil, PTT Aromatics
and Esso Thailand.
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