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News / Business/ Refinitive predicts ‘stronger’ near/medium outlook for fuel oil

Refinitive predicts ‘stronger’ near/medium outlook for fuel oil

27 Aug 2019
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Singapore bunkering publication Manifold Times was present at the ‘Low Sulphur Bunker Fuel 2020: Assessing Readiness of Malaysian Ports to Become Leading Bunkering Hub’ conference held in Kuala Lumpur on Tuesday (20 August):

Prices of low sulphur fuel oil (LSFO) will are expected to rise after in the near to medium period after IMO 2020, suggests the Director of Oil Research at financial markets and infrastructure data provider Refinitive.

Yaw Yan Chong, was delivering a speech at the ‘Low Sulphur Bunker Fuel 2020: Assessing Readiness of Malaysian Ports to Become Leading Bunkering Hub’ conference in Kuala Lumpur on Tuesday (20 August) when he forecasted the development.

“There isn’t enough production of low-sulphur fuel oil globally to meet the 11-12 million metric tonne (mt) per month demand,” he told delegates.

“In all, production of low-sulphur fuel oil, including volumes consumed by the sulphur emission control areas (SECAs) and the new capacities, are estimated at around 3.5 million mt per month, come 2020. Another about 2 million mt per month of demand will remain as high sulphur fuel oil consumed by vessels that have installed scrubbers, at the start of 2020.

“There is still a balance of over 5 million mt per month that must be met.”

In his presentation, Yaw noted several oil majors including ExxonMobil, Shell, BP, Sinopec and Total already declaring their ability to offer IMO-compliant fuel.

Other majors, including PetroChina, Uniper Energy, SK Innovation, and Vitol are respectively making preparations for IMO 2020.

In total, Asia is expected an estimated 2.33 million mt per month of new LSFO production capacity heading into IMO 2020.

“There can be potentially more LSFO supply coming from other refiners, notably the Chinese, and the possibility of using more heavy low-sulphur crudes, e.g. the Australian grades, as blendstock,” he highlights.

“Other Asian refiners, notably Taiwan’s Formosa and South Korea’s S-Oil have also just started offering LSFO cargoes.

“But, we believe that the market will have to turn to the gasoil pool, whether as pure gasoil, or some gasoil-fuel oil blend, to meet a significant portion of its demand.”

To date, there are at least 12 VLCCs and an even larger ULCC, all function as floating storages carrying LSFO, with a combined capacity of over 3.5 million mt located off-Singapore port.

“With the large inventories already in storage leading up to Jan 1, 2020, and more to come before the deadline, we expect there to be no shortage of LSFO on the immediate aftermath of IMO 2020 in Asia, and there might even be an oversupply situation in the short term,” explains Yaw.

“However, given the huge volume gap between global bunker demand and LSFO production globally, we expect that cargo replenishments will not keep pace with outgoing fuel.

“The market could become tighter very quickly, leading to a scramble for the limited LSFO barrels.

“As such, we are expecting a bullish outlook for fuel oil in the near to medium.”

The ‘Low Sulphur Bunker Fuel 2020: Assessing Readiness of Malaysian Ports to Become Leading Bunkering Hub’ conference is hosted by Port Klang and organised by the Maritime Institute of Malaysia.

Photo credit: Manifold Times
Published: 27 August, 2019

 

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