- HSFO demand to fall 60% and MGO demand to be more than double next year due to new regulations on shipping fuel.
- Demand for HSFO will fall from 3.5 million barrels per day to 1.4 million bpd and demand for MGO will increase from 900,000 bpd to 2 million bpd.
- VLSFO demand might reach 1 million bpd in 2020 and 1.8 million bpd by 2024, while MGO demand will peak in 2020 and decrease to 1.8 million bpd by 2024.
- About 4,000 scrubbers will be installed by 2020, consuming around 680,000 bpd of fuel oil on average, up from 340,000 bpd in 2019.
- The IEA estimates that about 4,000 scrubbers will be installed by 2020, consuming around 680,000 bpd of fuel oil on average, up from 340,000 bpd in 2019.
- Annual gasoil demand growth will rise to 0.9 percent by 2024, supported by IMO 2020, with marine demand growing at a rate of 12.7 percent per year.
- Refiners are expected to raise their gasoil output by 2.3 million bpd by 2024.
The International Energy Agency forecasts that High-sulphur fuel oil demand will fall 60 percent next year while marine gasoil demand will be more than double due to new international regulations on shipping fuel, says an article published in Reuters.
Disruptions anticipated though firms had years to prepare
A new 0.5 percent sulphur content cap in shipping fuel set by the International Maritime Organisation (IMO) will come into effect in 2020, one of the biggest fundamental events to hit oil markets in years.
Refiners and shipping firms have had years to prepare, but disruptions are still anticipated. Vessels will have to stop using high sulphur fuel oil (HSFO) unless they install filters, or use far more expensive compliant fuels.
MGO likely to be opted with limited VLSFO supply
A fuel type designed to meet the new cap, very low sulphur fuel oil (VLSFO), will initially be in limited supply, and quality discrepancies at different ports mean shippers are likely to stick to another compliant but pricier fuel, marine gasoil.
Fall of HSFO and rise of MGO demands
In 2020, “demand for HSFO… will fall from 3.5 million barrels per day to 1.4 million bpd,” the IEA said in a report. “Demand for marine gasoil (will increase) from 900,000 bpd to 2 million bpd.”
The IEA expects VLSFO demand to reach 1 million bpd in 2020 and 1.8 million bpd by 2024, while marine gasoil demand will peak in 2020 and decrease to 1.8 million bpd by 2024.
Option to escape high price of MGO
A slight shortfall in marine gasoil supply next year is likely to push up prices by a fifth, assuming a significant level of non-compliance, the IEA said, and a draw on gasoil stocks of about 200,000 bpd.
One solution for shipping firms is to install sulphur filtering units on board, known as scrubbers, which would allow vessels to continue burning cheaper HSFO.
The IEA estimates that about 4,000 scrubbers will be installed by 2020, consuming around 680,000 bpd of fuel oil on average, up from 340,000 bpd in 2019.
Alternate usage planned
As HSFO demand drops, the IEA expects the unwanted product to be used for cement plants and power generation particularly in the Middle East, where 11 gigawatts of new power capacity is being installed, mainly in Saudi Arabia.
Non-compliance in the initial phase expected
The agency also expects a significant level of non-compliance in the first year of the new regulations due to the shortfall of VLSFO. It expects non-compliant vessels to account for 16 percent, or 700,000 bpd, of HSFO demand.
Looking ahead to 2024, annual gasoil demand growth will rise to 0.9 percent, supported by IMO 2020, with marine demand growing at a rate of 12.7 percent per year.
Refiners are expected to raise their gasoil output by 2.3 million bpd by 2024.
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Source: Reuters
