From Bloomberg via gCaptain:
They may still be six months away, but new rules on marine fuels are already sending shock-waves through the little-known world of refinery feedstocks.I've been a bit obsessive about the new rules for the last couple years. For some links that may be of interest see last Monday's "Shipping: 2020 Low Sulphur Rules Less Than 6-Months Away - There's A Trade For That"
The price of these low-sulfur, heavier oils — that refineries make and then reprocess into transport fuels like gasoline and diesel — has jumped in Europe in recent weeks because the shipping industry is starting to drive up demand for the products. The surge benefits some refineries while hurting others.
“We’re moving from an old norm to a new norm,” said Steve Sawyer, senior analyst at energy consultant Facts Global Energy. “The market is paying a higher premium for low-sulfur material than it did before because people are looking to stockpile low-sulfur bunker fuel.”
Refiners typically run feedstocks — in particular straight-run fuel oil and vacuum gasoil — through upgrading units, converting them into more valuable transport fuels. That means there’s historically been a link with prices for the finished fuels. That relationship is now being disrupted by the need to produce cleaner marine fuels before a 0.5% sulfur cap stipulated by the International Maritime Organization that starts in January.
Straight run fuel oil with 0.5% sulfur recently turned more expensive than Brent crude in northwest Europe for the first time in five years, according to Jan-Jaap Verschoor, director of Oil Analytics, a firm that tracks margins across the global refining industry. The price hike for the feedstock makes sense as refiners buy up the product in preparation for ramping up production of next year’s marine fuel, he said.
The market for very low sulfur fuel oil, or VLSFO, is already heating up in Europe....MUCH MORE
