IMO2020: OPEC Charts Sulfur Change Upside and Downside

by Ship & Bunker News Team
Monday September 24, 2018

Crude oil will be in greater demand while producers of heavy or high sulfur crudes will lose out is how oil producers' organisation OPEC has the coming rule change on the sulfur content of marine fuel.

Long a useful source of residual oil demand, shipping's demand will shift to low sulfur product grades once the global sulfur cap on bunker fuel falls to 0.5% from its current 3.5% at the start of 2020.

Refining runs will increase to ensure sufficient middle distillate supply for the global shipping industry, according to OPEC's latest World Oil Outlook as cited by oil-pricing agency S&P Global Platts.

That increase is expected to push global oil demand to 1.7 million barrels a day (b/d) in 2020, from 1.4 million b/d in 2019, according to the report.

However, the increase in crude oil demand is expected to taper off after the initial surge.

The price impact will see heavy and high sulfur crudes weaken "potentilly severely" the report is quoted as saying. Conversely, light crudes are expected to increase in price.

The report estimates that more than 200,000 b/d of the incremental refining demand in 2020 will be surplus high-sulfur fuel oil.

As high sulfur residual fuel prices are expected to fall, once the price differential between high and low fuel oil grades is known, the demand for ships's scrubbers will rise with 2,000 ships installing the equipment by 2020 (compared to the current 500), the report said.

Ship & Bunker News Team
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