According to a Platts report, OPEC says that Marine fuel regulations on sulfur that go into effect January 1 will have a less disruptive but still considerable impact to the oil market than previously feared.
Market stresses
OPEC said in its World Oil Outlook that some of the market stresses will be mitigated with
- Lower expected oil demand growth,
- a pick-up in the pace of scrubber installations and
- increases in the availability of compliant fuel.
Impact not disruptive as expected
“Recent assessments indicate that the global refining system will have sufficient flexibility to address the changes in the maritime sector’s fuel mix,” the report stated.
“Nevertheless, the impact on high sulfur fuel oil prices, the gasoil/HSFO spread, as well as HSFO-rich crude oil prices, will still be significant, although less severe than previously expected.”
OPEC’s Forecast on compliance
Global compliance
The International Maritime Organization will implement rules to limit the sulfur content of marine fuels to 0.5% from 3.5% starting in 2020.
OPEC’s outlook forecasts that :
- Compliance will be about 85% in 2020, up by about 10 percentage points from last year’s outlook.
- Compliance will rise to almost 90% by 2024 and to eventual near full compliance.
- Expects 2,500 vessels to have scrubbers installed in 2020, eventually rising to almost 5,500 ships.
HSFO demand
OPEC estimates that marine HSFO demand will decline from 3 million b/d in 2019 to 1.2 million b/d in 2020 and then recover to about 1.5 million b/d, due to scrubber installations.
“As the current HSFO market tightness has been caused mostly by declining medium and heavy sour crude supply, the impact of the IMO regulations on HSFO pricing is likely to be less severe than previously expected,” OPEC said in the report.
Middle distillates and LSFO
Meanwhile, combined demand for middle distillates and low sulfur fuel oil will increase to 3 million b/d in 2020, from about 1.1 million b/d currently.
Diesel demand in the bunker sector is forecast to rise to about 1.5 million b/d in 2020, from about 900,000 b/d currently, OPEC said.
Compliant 0.5% sulfur blend fuel will see demand increase to about 1.6 million b/d in 2020, from about 300,000 b/d currently, the report stated.
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Source: Platts
