Asia/Pacific News
Tankers Experiencing Lower Activity in Fuel Oil Trade from Asia
Poten & Partners, Inc. (Poten & Partners) Monday said that oil tankers are seeing less long-haul fuel oil activity from Asia as a result of increasing capacity at Asian refineries lowering import needs, and more stringent sulfur regulations fuels lowering global demand for high sulfur bunkers.
"Increased Asian refinery capacity has also resulted in higher production of fuel oil (as well as all other oil products) in Asian countries," said Poten & Partners.
"This increase in domestic supply naturally resulted in decreased imports of fuel oil, with Southeast Asian fixtures declining over 14 million metric tonnes (mt) from 2012-2014."
Asian refining capacity grew by 5 million barrels per day (bpd) from 2007 to 2013 and is expected to grow by 2.7 million barrels per day (bpd) from 2015-2020, Seatrade Martime reports citing data from BP and the International Energy Agency (IEA).
Meanwhile, fixtures of fuel oil on VLCCs, suezmaxes, and panamaxes have reportedly dropped 5 million mt each between 2013 and 2014, while fixtures of fuel oil on aframaxes decreased by 2 million mt in the same period.
"With fuel oil demand and imports decreasing in Asia, arguably the product's biggest market, and around the world, it is difficult to envision how fuel oil will remain highly in demand and traded in the future," said Poten & Partners.
The tightening of Emissions Control Area (ECA) rules has also had an impact on demand, with vessels now being required to use a 0.10 percent maximum sulfur product within the ECAs instead of the previous 1.0 percent limit.
In practice this has meant the majority of operators have switched from using a low sulfur fuel oil product for compliance to burning a distillate product.
"Now, most affected shipowners are using marine gasoil, a middle distillate low sulfur fuel, in these coastal zones, with many others starting to look to the fuel as a viable alternative to residual fuel oil," noted Poten & Partners.
Even in Asia, where there is currently not an ECA, there has been an increase in demand for ECA compliant fuel, with the latest data from the Maritime and Port Authority of Singapore (MPA) showing low sulfur MGO (LSMGO) sales in Singapore for the first half of 2015 were almost four times the volume sold during the same six month period in 2014.
Last week it was reported that a record of nearly 6 million tonnes of fuel oil traded in June caused massive congestion at Singapore's oil terminals.
