Refiners' Profits to Rise on Higher Distillate Demand

Tuesday June 11, 2019

Analysts have reaffirmed their belief that distillate prices will rise ahead of the global switch to low sulfur bunker fuel which comes into force in six months' time.

Some analysts expect a sizeable price jump as ship operators and fuel sellers begin stocking up, but warn existing refining capacity could fall short, according to Reuters.

"The industry is not ready," Kurt Barrow, an IHS Markit consultancy vice president, was quoted as saying. The analyst is forecasting a "sizeable" price increase for diesel.

"You're not going to build enough new refining equipment nor add enough scrubbers" to meet initial requirements for very low sulfur fuel oil, he said.

Forecast demand for by analysts for IMO 2020-compliant marine fuel should reach between 1.6 million barrels per day (bpd) and 2.7 million bpd as shippers begin loading storage tanks and clearing vessels of existing bunker fuels.

Demand for bunker fuel in 2018 was 3.5 million barrels bpd.

With the rise in demand, those refiners able to produce International Maritime Organisation (IMO) 2020-compliant are likely to reap the benefit in terms of a rise in profits, the report said.