DHT Expects Ample HSFO Supply After 2020

320,050 dwt VLCC DHT Condor. Image Credit: DHT Holdings

DHT Holdings, Inc. (DHT) expects there to be ample HSFO bunkers available in the post 2020 market.

The comments come amid much debate on the matter, with several suppliers warning - both before and after this summer's scrubber order boom - that HSFO demand will be too low to make ongoing supply of today's favourite fuel economically viable anywhere except the major supply ports.

But having ordered twelve exhaust gas cleaning systems (EGCSs) in July from Alfa Laval, and last week revealing it has now ordered units for an additional four VLCCs, DHT does not believe HSFO supply will be an issue.

"We will not pretend to be an authority in analysing the oil markets. We do, however, travel extensively and our most recent customer visits in Asia, Europe, and the U.S. provides meaningful input to our thinking. The takeaway suggests that there will be compliant fuels available. However, as one would expect, economics will play an important role," Co-Chief Executive Officer Svein Harfjeld said during the firms' latest earnings call.

The tanker owner believes there to be two driving forces behind this. Firstly, that refiners' will only make compliant fuels if it is profitable to do so: "If a refiner will have to forego other products in a shift to supply the marine industry, we think it's reasonable to assume such decisions to be based on profits rather than regulatory changes," said Harfjeld.

Second, DHT says there is insufficient opportunity to destroy heavy crude oils, so supply is likely to be both plentiful and cheap.

And while in recent months we have seen owners voice strong views both for and against scrubbers, Harfjeld says his firm are "neither for nor against scrubbers" but simply have a responsibility to their shareholders to try to capture business opportunities for DHT: "In a nutshell, this is what our scrubber program is about."

In other scrubber related observations, fellow Co-Chief Executive Officer Trygve Munthe noted that there have been no new VLCC orders since June 1 of this year.

This is a result of a rise in newbuilding prices, and the fact it is too late to order new ships with scrubbers in time for the January 1, 2020 start date for the new sulfur cap, he said.