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ESAI Energy: IMO 2020 ‘going to hit Singapore hardest’

21 Jun 2019

A recently released Global Fuels 12-month Outlook published by oil market analysis and forecasting firm ESAI Energy explains how Asia will bear the brunt of the demand shift caused by the International Maritime Organization’s new sulphur cap for shipping fuels in 2020.

“IMO is going to hit Singapore hardest,” says ESAI Energy analyst Chris Cote.

“Complex logistical changes at storage depots are already underway, but we still expect hiccups come January in the world’s busiest bunkering hub.”

According to the report, Asia makes up 40% of global bunker demand, with Singapore, China, and Hong Kong accounting for most of that market.

At the same time, the relative availability of MGO to LSFO in Asia means that MGO will be a more likely substitute in that market. In other regions, substantial shifts are taking place from HSFO to LSFO. A big shift in demand will move global markets, it explains.

At the same time, however, global economic growth and trade flows will continue to slow next year, and bunker demand is expected to contract.

The above development is expected take the edge off of the sulphur cap’s impact, but ESAI Energy still expects diesel spreads will get a boost while high sulphur fuel oil discounts will widen significantly.

Europe, meanwhile home to several other key ports, will also have to act quickly to comply with the rule.

“In Rotterdam especially, high sulphur fuel oil is going to move into surplus quickly,” adds Cote.

“The heavy discounts that result will weigh on the margins of some refiners there. Despite higher distillate premiums, there are going to be losers.”

Published: 21 June, 2019

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