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Customer LoginsIMO 2020 Insights From Tom Kloza, S&P Global
On 1 January 2020, a significant impact on fuel markets emerged as the International Maritime Organisation (IMO) implemented a new regulation for a 0.50% global sulphur cap for marine fuels. Under the new global cap, ships will have to use marine fuels with a sulphur content of no more than 0.50%S against the current limit of 3.50%S in an effort to reduce the amount of sulphur oxide. The IMO 2020 regulations, reducing sulfur levels in bunker fuel, stand to have major repercussions for oil prices.
Fuel switching and the additional demand for lower-sulfur fuels has lead changes in the global refining market, with higher refinery utilisation in 2020.
It is a challenge to remove sulfur from petroleum molecules among the 150 or so U.S. refineries. Complex refiners may be able to cope with the transition, but simple refineries may face enormous challenges. Therefore, very light and very sweet crude oil blends may be the preferred feedstock for processors that don’t have sophisticated desulfurisation equipment.
With the new rule, demand for compliant marine fuel is expected to boost ultra-low-sulfur diesel and IMO-compliant diesel as it heads to tidal waters where ships may pay well over the price of crude for these fuels. The estimated range from the present diesel “crack” of about $18/bbl to $40/bbl or more above the price of Brent crude.
IMO 2020 stands to be positive for refiners who make the new Very Low Sulfur Fuel Oil (VLSFO), storage operators and fleets that have invested in scrubbers to bring non-complaint fuel up to spec .Additional will be incurred for shipowners/charterers who rely on Marine Gasoil (MGO).
More from Tom Kloza
Bunker Fuel Market Volatility Amid IMO 2020 & COVID-19 (Asia)
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