A new report has predicted a boom in distillates demand thanks to IMO's new sulphur rules.
Bank of America Merrill Lynch researchers said the spike will be felt immediately after 1 January, 2020, causing a long-term shift in refining and shipping dynamics.
The report predicts a rise of between 1.3m barrels per day (bpd) and 4m bpd for distillates.
“The momentous increase in diesel demand that is set to occur in 2020 could result in diesel cracks hitting $40/bbl during 2020 and we expect a strong physical demand for diesel to start in second-half 2019 as retail bunker providers and ships start to fill their tanks with low sulphur fuels,” the bank said.
It forecasts that IMO 2020 will add 1.1m bpd to marine gasoil (MGO) demand and 1.3m bpd for low-sulphur fuel oil (LSFO),
The bank said that refinery capacity has lagged behind demand growth, leading to a deficit in the diesel market and causing global stockpiles to approach five-year lows.
Utilisation rates will need to be increased to 2020.
Turning to the other main way of complying with IMO 2020, scrubbers, the report said: “We forecast less than 900 vessels will have scrubbers before 2020, accounting for 270,000 bpd of HSFO demand,” the researchers said.
Crude demand is also poised to rise as a result of the changes.
And it concluded: "Shippers also have the option to cheat if they are willing to face the penalties of getting caught."
