Singapore stockpiles of low sulphur marine fuels held in floating storage are swelling ahead of a 2020 global deadline, reports Reuters.
Transition after burning coal to oil
Low sulphur marine fuel stockpiles in Singapore floating storage are swelling ahead of global 2020 deadline rules.
The new fuel rules are said to mark the shipping industry’s biggest fuel transition since it moved from burning coal to oil.
Sulphur regulation
The International Maritime Organization (IMO) has banned ships from using marine fuels, or bunkers, with a sulphur content exceeding 0.5% from Jan. 1, 2020 – compared with a cap of 3.5% now – unless they are equipped with so-called “scrubbers” to clean sulphur from exhaust emissions.
Supply concerns eased
Concerns of supply shortages as the new rules kick in have eased as the amount of low-sulphur fuel oil (LSFO) and components to produce it that are being held in tankers around Singapore – by far the world’s largest bunkering hub – have risen steadily over the past few months.
“The LSFO stock-build in these floating storage (tanks) eases the transition into 2020, and shows that it is not going to be as catastrophic as some previously thought,” said Serena Huang, senior market analyst at oil analytics firm Vortexa.
VLCC carrier storage
According to Vortexa’s latest assessments, about 4 million tonnes of LSFO are being stored on board 18 very large crude carriers (VLCCs) around Singapore.
This is an increase of around 14% from industry estimates for IMO-compliant LSFO and components being held in tankers in July.
Estimates of further stock increase
Taking into account Malaysian port areas, including Linggi about 200 km (125 miles) northwest of Singapore in the Malacca Strait, estimates of LSFO stockpiles rise further.
Analysts in Singapore said that there are about 7 million tonnes of LSFO and related blendstocks in floating storage in the city-state and neighbouring Malaysia, with another 2 million tonnes of fuel fitting the new specifications in landed storage.
Adding to regional supplies, ultra-large crude carrier (ULCC) Oceania – one of the world’s largest supertankers – arrived at Linggi this week filled with about 420,000 tonnes of LSFO and components, according to a ship tracking data.
Ramp up production of LSFO
Refiners around the world, from Brazil to India and across East Asia, are also ramping up production of LSFO ahead of the 2020 deadline to meet the expected spike in demand as global shippers transition away from higher sulphur fuels.
“Concerns within the industry over the stability of (LSFO) have abated considerably, opening the door to much more rapid adoption of (LSFO) than we previously thought,” said research consultancy Energy Aspects in a note issued on Wednesday.
Energy Aspects as a result revised its demand estimate for the fuel to 1.5 million barrels per day (bpd), up by 50% from its forecast in 2018.
Parties in alert state
But while suppliers have stockpiled inventories of IMO-compliant fuels for months, other industry participants remain on alert over issues such as availability and how some of the new LSFO blends will perform in ship engines and holding tanks.
“I still anticipate mild chaos,” said a Singapore-based marine fuels trader.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Reuters
