Changes afoot in global oil market. File image/Pixabay.
Feedstocks used by refineries to produce high-end refined oil products are rising in price on increased demand.
In a round robin piece checking in on oil analyst opinion, business news provider Bloomberg reports that the price of low sulfur fuels in Europe has been rising over recent weeks. The report concludes that demand from the shippng sector is behind the increase in price.
Citing Jan-Jaap Verschoor, director of Oil Analytics, a firm that tracks margins across the global refining industry, the report said that straight run fuel oil with 0.5% sulfur recently turned more expensive than Brent crude in northwest Europe for the first time in five years.
Feedstocks such as straight run fuel oil and vaccum gasoil have been earmarked by refiners as desirable for producing low sulfur fuel oil that conforms to the new 0.5% sulfur cap on bunker fuel. And as both shippers and refiners ready themselves for the change, demand for feedstocks has increased.
Eugene Lindell, senior oil market analyst at JBC Energy GmbH, was quoted saying: "The strength in secondary feedstock will last for as long as refiners are in very low sulfur fuel oil production mode."
While the market for 0.5% sulfur fuel is currently small, this will change the closer to IMO2020 the market gets leading Verschoor to conclude that there will be a run on low sulfur materials.