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squeezetracker 254 posts  |  Last Activity: Feb 27, 2015 2:43 PM Member since: Apr 5, 2011
  • Anyone who is actually studying MPEL's business plan knows that 95% of MPEL's adj ebitda was from mass gaming and that junket-related VIP play has less to do with MPEL's ebitda generation than any other company operating in Macau... Further, David Group does not have any junket rooms in MPEL's properties, but at odds qwith reports last week that they were closing ALL 7 rooms they had on Macau, they have now confirmed closing only 3 of their 7 Macau cage rooms at WYNN and Sands properties... fun quotes from David Group in the Bloomberg articles this weekend though.

    "David Group is shutting three of its seven rooms that cater for high-end players at casinos, it said in a statement on Saturday. The company, which runs rooms at casinos including those operated by Sands China Ltd. and Wynn Macau Ltd. (1128), is taking the action as part of a re-organization prompted by an industry downturn, Frank Ng, the company’s director of corporate communications, said by phone.

    “We’re adjusting our business strategy; this is a general trend in the industry,” Ng said. “We’re hibernating. Once we wake up, we can restart.” The company can reopen the rooms when the market conditions improve," he said...

    The Chinese government’s clampdown on corruption and extravagance has cut David’s high-end clients’ spending on gambling tables, he said. The group expects the casino industry to recover from the fourth quarter as more resorts open, boosting customer traffic and revenue, Ng said...

    David Group is taking more wealthy customers to Asian centers with more relaxed visa approval process, such as Manila, Vietnam and South Korea, Ng said. David takes its VIPs shopping and sightseeing, and allows them to gamble at its private rooms in local casinos, he said. As part of its marketing strategies to draw gamblers, David Group publishes a lifestyle magazine in China to promote its brand. It also has a film company."

  • squeezetracker squeezetracker Jan 19, 2015 8:08 AM Flag

    vegasbaby/doyour homework and all the rest...

    Another new alias here?

    You might want to check the HK listings before making such uninformed comments. and try to limit yourself to just 7-8 aliases here while you hype mgm, the worst-positioned and most overvalued of all the publicly-traded casino companies. But thanks for cheering us up with your "analysis". LOL

    Everyone reading here who can speak English understands the many factors that caused the group underperformance over the last 9 months... but most also understand why MPEL has SIGNIFICANTLY outperformed the group over the last few years... ans more importantly, why MPEL is the best positioned of ALL of the Asian gaming companies looking to the future. While you obviously struggle with catalysts influencing the shares, what matters to FUTURE share price performance is what will happen in the FUTURE, not over the last 9 months as the group reset has taken place.

    now off you go to ignore with your other 9 aliases...

  • squeezetracker squeezetracker Jan 18, 2015 12:33 PM Flag

    Xi Jinping's speech on corruption last week also shed more light on the reality that political foes and entrenched politicians he wants to ensure have no office or sideline power are the target of his "institutionalized" antigraft campaign. These comments underscore MPEL's CEO comments last week that Macau is not the target of Xi's efforts.

    "In the speech, Xi cited for the first time the names of Zhou Yongkang, a former member of the party’s Politburo Standing Committee in charge of domestic security, and Ling Jihua, a former top aide of retired president Hu Jintao, as high-profile examples in his graft-busting efforts. These cases “demonstrated to the world the Communist Party has a head-on approach to problems and correcting mistakes,” Xi said, calling the effort “self-purifying.”
    The risk of Xi’s anti-graft drive has “probably receded” since Zhou was formally put under investigation in July.
    “For Xi, the most dangerous period was prior to July when he had to convince the leadership and the elder leaders of the party to get rid of Zhou and prosecute him,” he said.
    In laying out goals and challenges for this year, Xi stressed the importance of institutionalizing his campaign. “Only by making it into a habit, a norm” can we deliver long-run and lasting impacts, he said.
    Xi said this year’s anti-graft work would focus on strengthening official accountability mechanisms, keeping a closer eye on family members and close allies of potentially corrupt officials, and improving supervision of state-owned enterprises, a corruption-plagued area that saw hundreds of senior officials toppled...'

    LOL at the new doyourhomework, one of 8-9 alias dope here? His "reality": "Macau gaming will fade just like Vegas," "3 years of declines and then level off at half today's level?" and Vegas is strong? He clearly doesn't understand either market. And what a conclusion: "could go up or down"... ebitda is 95% mass now, and run rate will double by the time Tower 5 is ramping.

  • A Turning Point in China’s Anti-Graft Campaign
    A key phase of the Chinese Communist Party’s anti-corruption campaign has concluded

    The political downfall of a former aide to Hu Jintao was finally confirmed some two years after a speeding Ferrari first crashed along a Beijing street in 2012. In a brief statement released last week, the Central Committee for Discipline Inspection (CCDI) of the Chinese Communist Party (CCP) announced that Ling Jihua, vice-chairman of the Chinese People’s Political Consultative Conference, had been indicted for “serious discipline violations.” Following the impeachments of Zhou Yongkang and Xu Caihou, Ling was the third high-profile politician to be ensnared in China’s anti-graft movement in 2014...

    Fourth ‘Big Tiger’ Since Bo Xilai

    That it has taken this long for Xi to close in on Ling can be explained by the more pressing need of purging the Chinese public security apparatus and China’s military of the influence of their previous officeholders. Towards that end, it was crucial that Xi focused his energies on reining in the Jiang loyalists – Zhou Yongkang and Xu Caihou – before opening up a new front against the CYL. Having systematically rooted out Zhou’s men within the state security bureaucracy in addition to consolidating his own status in the Central Military Commission (CMC), Xi has wasted no time in widening the anti-corruption campaign to include Hu’s protégé.

    ...the removal of Hu Jintao’s former right-hand man reaffirms the fact that Xi Jinping has more or less removed the final vestiges of influence his predecessor had retained. Similarly, the political shortcomings of Jiang Zemin’s clique also gives Xi an additional bargaining chip. This breaks the trend in contemporary Chinese politics in which party elders had continued to hold sway despite leaving office.

    Xi is also unencumbered by the political gridlock caused by factional conflicts that marked the previous administration. With this initial phase of his anti-corru

  • squeezetracker squeezetracker Jan 17, 2015 8:36 AM Flag

    Just a couple of weeks ahead of the quarterly call and updated outlook from the group and MPEL, it is terrific to see him emphasize the powerful catalysts in the mass market future of Macau (and the Philippines) just ahead for MPEL and also to dispel the bs noise on the 1Q15 comps and HK delisting. Surprised he did not take the chance to underscore that already 95% of MPEL's ebitda is from mass...

    Also good to see the hysteria that built all week in Asian media over the potential for Mekkhala to become another "Super Typhoon" over the Philippines fade as the storm now looks to be more like merely a windy and heavy rain event, especially on the west (Manila) side of the islands.

  • Reply to

    Lawrence Ho's comments in ggrasia article

    by squeezetracker Jan 16, 2015 1:53 PM
    squeezetracker squeezetracker Jan 16, 2015 4:04 PM Flag

    Separately, Ho has said COD "Manila,without any advertising or marketing, is already exceeding our expectations [on the soft opening schedule].

    Also separately now MPEL has confirmed the official Grand opening for COD Manila is February 2 -- two weeks before the CNY celebrations begin.

    Everyone who wants out of the pool because Feb comps might not exceed last year's 42% YOY pop and before the many catalyst stream news starts hitting the tape ought to hurry... not much time left before MPEL's official revised outlook is filed.

  • Lots of excellent comments made here for those who are actually studying the story here . Ho's comments are a great recap of coming catalysts that are yet to be discounted in the share price.

    He begins by talking about Studio city's diversification and tables... sees 400 initially for Studio City when it opens "mid year" he says.

    Ho also comments on the yawn of the delisting and comments extensively about how pleased he is that MPEL has the manila concession. He also comes close to a rave about next comes Phase 2 at COD manila (a grand tower no doubt)... and notes that a second phase of Studio city is coming... with a quick comment that MPEL plans to hire 8000-10,000 people at Studio city now -- that is up quite a bit from from earlier estimates -- no doubt having a lot to do with the broad based "DIVERSIFICATION" they now are bringing.

    He ends by saying there is no better place for expanding the business than Macau.

    see grasia for rest of article

  • Reply to

    Manila City of Dreams

    by grftt Jan 15, 2015 9:46 PM
    squeezetracker squeezetracker Jan 16, 2015 1:36 PM Flag

    Great share and comments from you Dave!

    As you note below, the ropeadope crowd is back on this board -- still amazed to think they believe it worthwhile trying to panic folks into selling out at the bottom ahead of the parade of upside ebitda catalysts coming for MPEL this year.

    They and the media and "geniuses" among the confederacy of analysts not doing any real work on the sector are back to full press noise though, including Lisboa's prostitution monitoring that went on for over 12 months (under Xii's regime, to avoid prosecution one needs to be either pals with Xi or boyscout rules compliant as made loud and clear from Beijing), "visa" restrictions and "illicit money transfers" (contrast with legal VIP operations and money settlements) and the "corruption crackdown" which, as Lawrence called out this week, have nothing to with Macau's gaming, leisure and entertainment...

    Glad to the confederacy spewing nothing but old news repeatedly before the market begins discounting the upcoming catalysts.

  • Goog the title below for the Barron's interview following Studio City news this week.

    Melco's Ho Says New Resorts Will Help Lead Macau Recovery

    Ho's comments are crystal clear on Macau. He saya 1H comps will be tough vs peak numbers last year [e.g., Jan was up 7% and Feb was up 42% yoy in 2014], Macau's overall 2H15 should be much better and he is optimistic that a strong 2H will overcome the negative comp for 1H. As a result, Ho says Macau GR for the full year should get back to positive (mid single digits) range as it jumps past weak comps 2H14.

    Ho is in the cat bird seat on all of this as MPEL's room count will jump dramatically when Studio City opens, and MPEL's numbers should substantially outperform Macau's overall.

    He clearly explains that the corruption crackdown is not aimed at Macau or HK -- rather, it is aimed at corrupt officials and those on the mainland living too large (flashy cars, etc) while acknowledging that the spotlight on such behavior has caused many wealthy players to maintain the low profile we've discussed here since last summer.

    He also comments on COD Manila, sharing that it reminds him of early days on Macau adding that so far, without any marketing or advertising and even prior to the Grand Opening, COD Manila is "already exceeding expectations."

  • Reply to

    Visa restrictions

    by grftt Jan 14, 2015 10:09 PM
    squeezetracker squeezetracker Jan 15, 2015 9:04 AM Flag

    Hey Dave,

    Thanks for the share here. Maybe a few Swiss players will start coming to Macau after today's cap elimination. LOL

    Seriously though, other than the ggrasia article you shared a while back that two Macau companies have banned telephone betting (and maybe they all have by now), the Nomura guy is really simply repeating his comments from last summer, right? Other than formalizing corporate compliance, certainty of reviews of bank account activity and background checks, there have been no promulgated "new" restrictions since then to my knowledge.

    Bain's "pure play" comment must be wrt U.S. listed companies. The Macau-based subs listed in HK on the other 3 companies listed in the US market are all "pure plays" on Macau.

    Good to see Bain repeat his "bottoming" view a few times since he shared his "look back moment" perspective last Fall... more importantly, good to see Morgan Stanley's brightening outlook (~"recovery should be rapid") repeated again this week -- that analyst team has a lot more weight than Sterne Agee and their departure from the analyst group's gloomy sentiment is notable given that sentiment toward the group is awful as regurgitated endlessly by weak journalists and analysts in those outlets.

    OT -- This morning Saudi Arabia says they are going to begin cutting production as offshore rigs shutdown... Looks like they are ready to ease into calling "uncle" on crushing out marginal producers and no where to go with excess world supply as China has some 100 or so VLCCs storing crude for future advantage -- here's a guess (LOL): shorts on the oil complex into the meat grinder today.

  • squeezetracker squeezetracker Jan 14, 2015 4:07 PM Flag

    You must be referring to the Shanghai scene, not Hong Kong... and those easing out of condos in see-through buildings may be making a wise allocation change despite the running program changes to assure relative stability in China's realty markets --- both residential and commercial. Chanos must be shredded that after calling a "collapse" of China's economy for the last 4 years, things are now being reset on the most stable pathway possible for the master planned economy as the shift from production/export to consumtion and service based economy continues in leaps and bounds, all while China stockpiles the cheapest oil seen since 2008, a benefit it will meter out to commercial and consumer interests alike over the next several quarters and years if the current oil market turmoil runs a few more months and enough storage tanks get built in a hurry... per Bloomberg and other objective sources, some 80+ VLCC are full and bobbing in Chinese waters, and four new 1M barrel storage tanks are being hurried along to have a place to park the fire sale oil while it lasts.

    Your central planners are also taking steps to expand credit and liquidity for real estate and commerce -- not contract it as diversionary alias dthe98 has been suggesting for months now. And the recent cross exchange provisions should serve to expand liquidity for China's capital markets... stay off leverage in chop markets and you'll be fine grasshopper.

  • squeezetracker squeezetracker Jan 14, 2015 1:15 PM Flag

    4 thumbs down in 3 minutes? That's a lot of flailing for just one moron. LOL

    Where's the other 5-6 aliases known to post here? LOL

  • squeezetracker squeezetracker Jan 14, 2015 12:49 PM Flag

    blither blither blither... "Details" are troubling when one wants to blither glittering generalities huh d98. LOL Answer the questions and you will not be so lost. Get it?

    I don't "deny Xi is committed to controlling capital outflows"... but the focus of his effort is not about Macau. To the contrary, he and the new regime in Macau are very pleased with Macau's progress and contribution to China and henqin and srrounds -- rather, they do not want crooks and Xi's political foes spending illicit money there or otherwise using illegal channels to transfer ill-gotten funds. THAT has nothing to do with rules compliant VIP tours or how Chinese who have legitimately accumulated wealth (Say Jack Ma for example) spend their recreational money. THAT is also why the large majority of the large VIP tours are still busy in cage rooms in Macau and why only 20-25% or so ov VIP has left -- a far cry from your bs that "VIP is gone and never coming back" and now you add "junket system is done" when it is STILL going along at 75%+ of peak last year.

    You keep saying it is so, but there are no examples of where Beijing, Xi or anyone else is imprisoning anyone running tours or playing on them and complying with the rules involving VIP and money settlement. None.

    And about your bs on "diversification"? You have posted at least 5 times on this alias on this topic on threads I have discussed MPEL and macau's status on this point. Read MPEL's press release from Monday and my posts on this and the table allocation topic over the last two weeks, and Adelson's recent press release on it and you will be enlightened -- Beijing and Macau's new regime are getting what they want, esp from MPEL at COD and Studio City soon to open as the model "gaming, tourism, entertainment and leisure resort."

    As for further "diversification" efforts -- search the term "land bank" here for studied comments on that... Macau will never be a dancing elephant elephant in a tutu -- it is what it is

  • squeezetracker squeezetracker Jan 13, 2015 10:30 PM Flag

    Waiting for your answers to rhetorical questions 1-5 posed to poser dthe98 -- notice he has no answers other than to sign in on multiple aliases to thumb down posts that call out bs? LOL

    But here are a few more questions just for you since you apparently also think you are a hotel business expert. As those who do know a little about the hotel business, the seven questions below are very basic and easy to obtain answers to... the five questions posed to dthe98 on this thread -- and now you too -- require a depth of knowledge neither of you have demonstrated any capacity to answer.

    1. Re "ADRs"... in MPEL's case, how tight are ADRs to rack rates?

    2. How many serial quarters in a row has MPEL run above 95% occupancy?

    3. What has been the ave occupancy rate over the last 3 quarters?

    4. What is the trend turnaway rate for MPEL at COD Macau?

    5. How many of these "casino plays," including the HK listed companies and the four listed in the US, have lower reliance on VIP tour play than MPEL?

    6. How much of MPEL's premium mass is funded directly and very legally with MPEL vs through a tour operator?

    7. (best for last) For your darling MGM, what percentage of their current adj ebitda emanates from their single property in Macau? On a per table basis, how does that compare to (a) Bellagio and (b) the totality of their Vegas Strip properties?

    Can't wait to hear your attempt to answer these 12 fundamental questions... all things you ought to comprehend about what you are long or short if it is for more than beer money.

  • squeezetracker squeezetracker Jan 13, 2015 5:30 PM Flag

    Me crazy? LOL

    It is obvious for anyone who knows 101 about this sector, macau and Vegas that you have no clue what you are talking about -- at least dthe98 is intentionally trying to post diversionary dog #$%$. To elevate your knowledge, you might want to search the terms "Vegas resurgence" on this board and then consider that against your vacuous comments here.

    Here's the simple summary though. Apart from whales flown in from China since 2007, gaming revenue is dead dead dead in vegas, relegated to MCE, CMAs and blue hairs pulling low $ slots (which are negative YOY if you study the data) and tourists playing peanut limit blackjack and that is why all the Vegas casinos are empty except during holidays and when all the college kids descend.

    The Chinese whales (and Steve's "Latins" LOL) were flown in for May and June (30% YOY numbers and just 7% for July before going negative 12% (yes, minus 12%) YOY in August. Those high ceilings monolithic beasts just don't work now as MGM has learned the hard way after building 10 cathedrals and giving away City Center at SH expense.

    But as I rhetorically torqued on dthe98s post, when you say "VIP is never coming back", you can't logically mean the 75-80% of peak 2013 VIP revenue that continued right on playing while the 25% left? First they'd have yet to "leave"... but will that happen? Unless/until then, one can't assess that said 80% is "never coming back." Where the Chinese VIP tour players (or any other serious players for that matter) are likely "never coming back" is to Vegas. Xi Jinping is hunting all those foxes that already left China (and used to play in vegas before macau and other Asian venues were around)... well, by that I mean his political enemies and others Beijing thinks illegally confiscated China's money and left. The "crooks"who stayed in china leapt off tall buildings or are in jail or shot - they aren't going back to play tables games anywhere, neither are their "private club" pals.

  • squeezetracker squeezetracker Jan 13, 2015 1:20 PM Flag

    You keep on saying the same thing -- that VIP is not coming back -- do you mean the 75-80% still playing there on 9 or the 10 largest tours from 2012? They have not left, so when will they leave? Saying the same eraant comment over and over does not make it reality.

    You might want to do a bit of reading on Xi Jinping's family wealth... those folks and Xi's friends must be in the 80% or so of peak VIP junket play that continues on abiding by the rules, not transferring "illicit funds" through any inappropriate venues, and not under investigation for wrongdoing...

    Your comments on "50% VIP is too high" are interesting though... it would be fun to read your answers to these questions:

    1. Galaxy remains heavily reliant on VIP tours and actually saw an increase in VIP revenue last Q. When will their VIP revenue go away?

    2. On Macau last Q and consistent with trend, 95% of MPEL ebitda was from mass play -- not RCV in the cage rooms. Quick now: how much does ebitda go down by if 100% of RCV is gone from MPEL's results there?

    3. After Studio City (phase 1 and 2) and Tower 5 at COD are up and running, how much of MPEL's adj ebitda will be from VIP?

    4. When a baccarat player loses money that comprises "RC win" for the house, some 60% of that goes to the casino owner with the residual 40% going to Macau's gaming tax collector. There is nothing " illicit" about losing money in that venue or settling up that debt via rules compliant VIP tour operations -- but maybe you can explain how that somehow constitutes "a back door way to get money out of the red hot mainland"?

    5. How do you square up your recurrent doomsday scenario regarding Macau's with the new CE and Finance chief for Macau sharing constructive comments at the microphone and in Beijing in recent weeks?

    Since you obviously think you know a lot more than Lawrence Ho and Packer's comments would suggest they do about how things will unfold this year, your "analysis" ought to be educational.

  • squeezetracker squeezetracker Jan 13, 2015 10:33 AM Flag

    (Part 2)
    However, Macau’s casino industry will not be as reliant on these big spenders over coming years as it is commonly perceived. Analysis by Goldman Sachs shows that while 56% of gross revenues in 2014 are expected to come from the VIP segment, which is most affected by the crackdown, only 22% of earnings before interest tax, depreciation and amortization (EBITDA) will come from this segment. Goldman expects that by 2016 less than 50% of revenues, and 16% of EBITDA, will come from the VIP market.

    The expansion of ‘mass market’ gambling is likely to underwrite the earnings growth of Macau’s casinos. Many operators have adopted a ‘build it and they will come’ mentality by increasing the number of tables aimed at everyday players in the hope of attracting more Chinese tourists to visit Macau. Despite the cool chill of Beijing’s crackdown, the number of Chinese tourists visiting Macau grew 11% year-on-year in the third quarter.

    The bid to attract more mass market players means an evolution in the experience that Macau will offer gamblers over coming years. This will see Macau become more like Las Vegas by developing integrated resorts, where customers can not only gamble but also enjoy other forms of entertainment. Eight integrated resorts under construction will double the casino operator’s hotel capacity over the next three years, according to Bloomberg Intelligence. The opening of the Hong Kong–Zhuhai–Macau Bridge in 2016 will connect Macau directly to Hong Kong International Airport, while the expansion of border crossing operating hours, with the eventual goal of 24 hour border crossings, could help grow visitor numbers.

    Henqin Island, in the Zhuhai Special Economic Zone and directly adjacent to Macau, is also ramping up non-gaming attractions which should draw more visitors...

  • Barron's (NOT Shuli Renn lol)

    Gaming revenues hurt by corruption crackdown, but worst appears priced in as new resorts drive earnings growth.

    Fortune has not smiled on Macau’s casino operators in 2014. The red-hot winning streak enjoyed by casino stocks in the only place that gambling is allowed in China has been brought to an end by Beijing’s crackdown on corruption and extravagant spending.

    The reversal of fortune has been stark. The Bloomberg Macau Gaming Market Index advanced a staggering 100% in 2013, but this year the gauge has tumbled around 40%. SJM Holdings ( 880.HK ), whose Grand Lisboa casino is the tallest building in Macau, has been the worst performer with a 53% decline. The unrelenting drive to quash corruption and extravagant spending has stemmed the flood of gamblers keen to test their luck at the tables. The architect of the crackdown, Chinese president Xi Jinping, arrived in the special administrative region on Friday for a two day visit to celebrate the 15-year anniversary of the handover of Macau to China.

    But the misfortune that has plagued Macau’s casino stocks may be the opportunity that risk hungry investors have been waiting for. Investors that have sold their positions in the big casino operators have expressed concerns about the drop in the number of deep-pocketed VIP bettors visiting Macau. It is little wonder investors are downbeat, as slower growth in gaming revenue at the start of the year has transformed into an outright decrease in gaming revenues as 2014 draws to a close.

    However, Macau’s casino industry will not be as reliant on these big spenders over coming years as it is commonly perceived. Analysis by Goldman Sachs shows (cont)

  • Reply to

    IMPORTANT Prelude to 2015 Table Allocations

    by squeezetracker Jan 9, 2015 9:47 AM
    squeezetracker squeezetracker Jan 10, 2015 5:11 PM Flag

    Leung Tac, the new finance chief, is not alone acknowledging that Macau's future will remain primarily about its "special status" as the only legal gaming venue for China.

    The chief exec from Macau in his annual report to Beijing and also China's second most powerful politician, premier Li Keqiang, have made it clear they understand gaming resorts are Macau's reason for being so prosperous and important to Hengqin and surrounds. Seem they are intent on keeping Macau going and striving for "modest diversification" too while remaining mindful that Macau is pricipally about gaming and traffic for Hengqin. Excerpts below from the comments in Beijing last week... my favorite was the parts about "promote moderate diversification" and later "appropriate diversification" in Macau. MPEL best in class on that score with HOD and Studio City IR coming soon.

    "Chinese premier voices support to HK, Macao development

    Premier Li Keqiang on Friday pledged continued support to the governments of Hong Kong Special Administrative Region (SAR) and Macao SAR when meeting with leaders of the two regions.

    Leung Chun-ying, Hong Kong SAR chief executive, and Chui Sai On, Macao SAR chief executive, were in Beijing to report their work in 2014 to the central government...

    When meeting with Chui Sai On [Macau chief exec] separately, the premier praised what the SAR government has done in the past 15 years and urged them to seize new opportunities and promote moderate diversification of the Macao economy.

    Leung said the Shanghai-Hong Kong Stock Connect scheme enhances Hong Kong's connection with the mainland and boosts Hong Kong's financial sector. He vowed to develop the economy, improve the quality of people's lives and push forward the development of the region's political system.

    Chui also thanked the central government for its support of his administration and vowed to improve the livelihood of Macao people and work hard for an appropriate diversification of Macao's economy."

  • Citi first call piece
     We expect Chinese product oil demand growth to improve in 2015, but for
    crude oil import growth to slow; thus, anyone hoping for China to drive a
    rebound in oil prices is likely to be disappointed – This report updates our
    Chinese oil forecasts published in China’s Thirst for Oil – Waning and Changing.
     Incomplete pass-through from crude prices to Chinese product oil prices –
    While Brent prices have declined around 50% since June, Chinese product oil
    prices have declined only 20-30%, significantly reducing the positive demand
    impact. However, prices are likely to continue falling in the first half of 2015 as lags
    in the system are overcome.
     Product oil demand growth to improve – We forecast growth of 390-k b/d (3.6%)
    in 2015, up from 240-k b/d (2.3%) in 2014. Lower oil prices could save China over
    1% of GDP on imports, helping boost consumption. We are not bullish on macro
    fundamentals, but passenger transportation (gasoline and kerosene) growth should
    be strong, and fuel oil demand is under less pressure due to only moderate teapot
    crude import quota expansions. Moreover, lagged impacts of lower prices could see
    2016 product demand growth at least as strong as in 2015.
     Strategic Petroleum Reserve (SPR) stockpiling to be stronger in 2015 – The
    main brake on SPR stockpiling has been a shortage of coastal storage facilities. In
    2015, up to five new facilities and 100m bbls of capacity are likely to open. The
    combination of low prices and these openings will likely see strong filling in 2015.
     Crude oil net import growth to slow – We expect crude oil net imports to increase
    by only 200-k b/d (3.3%) in 2015, significantly slower than the 504-k b/d (8.9%)
    increase in 2014. A slower build-out of refining capacity and record commercial
    storage builds in 2014 are likely to limit growth in 2015, balanced in part by SPR
    stockpiling and continued weak domestic crude production growth.
     Product oil trade flow trends

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