More than enough low sulphur fuel oil can be produced by the world’s refineries by 2020 providing gasoil prices remain high enough, Nordic corporate bank SEB says.
In a report released by bank’s chief commities analyst Bjarne Schieldrop, SEB says that to produce enough marine fuel oil 0.5% (MFO) in 2020 using straight run fuel oil 0.5%, all that is needed is a sufficiently high product price of around $90 per ton less than gasoil.
“Much will happen in the year to come,” the report says, adding that the 0.5% MFO will “physically and financially” emerge in the first half of 2019.
It says spot prices for the fuel are likely going to be “fairly modest” at first given the very low consumption of the fuel in early 2019.
But forward prices for 0.5% MFO for 2020 and 2021 delivery are going to look “much more expensive than the 3.5% heavy fuel oil (HFO) price, SEB says.
“The real impact on HFO 3.5%, MFO 0.5% and gasoil 0.1% prices will in our view really emerge and materialise in the second half of 2019 as shipping increasingly shifts away from HFO 3.5% and over to MFO 0.5%,” SEB says.
“That is also when we expect the forward product price spreads increasingly to widen out further.”
SEB expects that concerns over the quality and instability of the new 0.5% products will “gradually dissipate during 2019” as more users are able to test the fuel and it becomes clearer that it will largely be a fuel-oil based product, rather than a gasoil one.
But SEB says: “Comingling of MFO 0.5% between different suppliers is likely going to be a problem in the same magnitude as it already is a problem for HFO 3.5% fuel today.”
“The IMO 2020 sulphur event will play out very differently for different shipping segments,” the analysts say, with the speed of scrubber installation being a key deciding factor.
They forsee a quick scrubber uptake for sectors with large and fewer vessels but for smaller ships this will take longer.
