Now, as we approach implementation of the 2020 low-sulfur rules we're starting to get some clarity on who will be running high-sulfur bunker fuel with scrubbers, who will be using LNG (or in at least two cases, hydrogen) who will be going with low-sulfur-but-higher cost fuel and who might run the risk of running dirty bunker fuel (don't do it in Singapore or Rotterdam, their sulfur sniffers are already in place)
What this means for the refiners as they figure out what to do with the various hydrocarbons from bottom of the barrel asphalt to residual fuel oil to diesel to kerosene to gasoline.
We'll have more on the oil refining trade over the next month or two, in the meantime this is a good backgrounder.
From Oilprice:
The new ship fuel regulations coming into force at the start of 2020 are set to create an initial confusion on the refining market and crude oil and oil product trade flows, analysts and industry experts say.....MORE
We are now just 14 months away from January 1, 2020—the start date which the International Maritime Organization (IMO) has set for the new rules on using only 0.5-percent or lower sulfur fuel oil on ships, unless said ships have installed the so-called scrubbers—systems that remove sulfur from exhaust gas emitted by bunkers.
Analysts, experts, and industry representatives are divided as to how great of an impact those new rules will be and whether there will be enough middle distillates—which include diesel and the lower sulfur marine gasoil—to meet demand for both land use, in road transportation, agricultural machinery and industry, and for use on ships at sea.
One way to comply with the IMO rules is to have scrubbers installed, which requires upfront costs, but later these would pay off with the expected much lower price of high-sulfur fuel oil.
The other way is using fuel that contains 0.5 percent sulfur. These fuels are basically in the same middle distillate product category like road diesel or jet fuel.
Some analysts have started to warn that the competition for those middle distillates could lead to shortages of diesel, resulting in price spikes. The other camp says that with diesel demand slowing in Europe and possibly reaching plateau in demand in China, there will be enough middle distillates around.
Amid expectations of fuel prices spikes in a presidential election year, the Trump Administration is seeking to slow down the 2020 introduction of the new ship fuel rules. The Administration wants a phased-in rollout in order to “mitigate the impact of precipitous fuel-cost increases on consumers,” the White House said in an email to The Wall Street Journal last week....
Previously on this aspect of the big change:
Rich Rewards Await Top Oil Refiners as Ships Make Low Sulphur Switch Fuel
Top Norwegian Oil Analyst Quitting DNB to Pursue 2020 Low Sulphur Fuel Rule Riches
Shipping: The New Low Sulpher Rules Will Have A Huge Impact On the Oil Business (shipping and world economy too)
Oil/Shipping: "Where will all the residual fuel go after ships barred from using it?"
Shipping’s 2020 Low Sulphur Fuel Regulation to Hit Airlines
"Shipping: 2020 Low Sulfur Fuel Requirements Will Disrupt Oil/Refined Markets Up to Five Years".
"Shipping: 2020 Low Sulphur Rules Less Than 6-Months Away - There's A Trade For That"
Shipping: First Signs of 2020 Low-Sulpher Rules Starting to Rock the Oil Market
Have I mentioned the IMO 2020.... oh who am I kidding, fascination became idée fixe some time ago....
