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Gasoil prices to rise at least 20% on IMO 2020: IEA

12 Mar 2019

Global energy and commodity price reporting agency Argus Media on Monday (11 March) provided an industry update regarding the expected increase in MGO prices due to IMO 2020:

The IEA expects gasoil prices to rise at least 20pc in 2020 on higher demand for marine gasoil (MGO) from the shipping industry, while the agency expects gasoil prices to more than double if the sulphur cap agreed by the International Maritime Organization (IMO) is strictly enforced.

The IEA expects high-sulphur fuel oil (HSFO) demand to fall by 60pc in 2020, as it expects MGO to displace HSFO as the main marine fuel next year.

HSFO demand will fall from 3.5mn b/d to 1.4mn b/d in 2020, while MGO demand increases to 2mn b/d, from 900,000 b/d, in the base case scenario of the IEA.

The agency expects 0.5pc sulphur fuel oil demand to reach 1mn b/d in 2020, with the initial uptake remaining limited because of blending material and compatibility issues. Demand for 0.5pc fuel oil will later pick up to 1.8mn b/d in 2024, from 1mn b/d in 2020.

Non-compliance by the shipping industry will make up half of HSFO demand in 2020 with 700,000 b/d, while non-compliance is expected to fall sharply to 300,000 b/d in 2021 and then 60,000 b/d in 2024, the IEA said. The number of installed scrubbers is on course to reaches nearly 5,200 by end-2024, the agency said.

The lower price of fuel oil with sulphur content above 0.5pc will incentivise its burn for power generation after 2020, especially in the Middle East, according to the IEA. Saudi Arabia will be the main destination for HSFO for power generation after 2020, as the country has 8.5GW of fuel oil-fired installed capacity under construction, more than 75pc of the total number globally.
 

IEA 2020-2024 Marine Fuel Demand Forecast mn b/d  
           
Fuel 2020 2021 2022 2023 2024
Fuel oil 1.4 1.2 1.1 1.1 1.1
Of which: Scrubbers 0.7 0.9 1.0 1.0 1.0
Of which: Non compliance 0.7 0.3 0.1 0.1 0.1
0.5pc sulphur fuel oil 1.0 1.4 1.6 1.7 1.8
Marine gasoil 2.0 1.9 1.9 1.8 1.8
Total 4.4 4.5 4.6 4.6 4.7

Source: Argus Media
Published: 12 March, 2019

 

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