Viewpoints 2019: Freight and marine fuels

Author Stefka Wechsler, Editor

Argus editors analyse what to watch for in the freight and marine fuels markets as 2019 begins.

The retail bunker market is likely to become more dislocated in price from the cargo market in the lead-up to the January 2020 global marine fuel regulations. This could encourage a switch to swaps that settle on retail bunkers. Bunker blend compatibility and 0.5pc sulphur marine fuel availability issues will surface in the fourth quarter of 2019 and linger through 2020. The US-China trade war will continue to disrupt long-range east of Suez tanker trade flows. Rising oil output from the US Gulf coast and limited pipeline capacity will absorb US-flag shipping capacity.

Read our Viewpoint analyses for freight and marine fuels below.

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Viewpoint: Asia delivered, cargo bunker markets diverge
The delivered bunker fuel market is likely to become even more dislocated from the cargo market in the lead-up to the January 2020 implementation of the International Maritime Organisation (IMO) cap on sulphur content in marine fuels. This will have adverse implications for marine fuel market participants that need to hedge their physical exposure — and could encourage a switch to swaps that settle on delivered bunker prices, in order to reduce any increase in basis risk.

Viewpoint: Clean tanker recovery hopes for Europe
Positive signs lie ahead for product tanker owners, as chartering rates ticked up significantly in the fourth quarter of 2018, and bunker prices fell at the same time. Fleet growth slowed compared with last year, and forecasts put oil demand growth slightly higher in 2019.

Viewpoint: Concerns around bunker specs to stay
Compatibility concerns and fuel availability will overshadow progress made in meeting approaching 0.5pc sulphur marine fuel regulation.

Viewpoint: Depressed margins weigh on US VGO prices
US VGO differentials to the clean products 70:30 split rose to their highest level in almost four years near the end of November, signifying the weakest fluid catalytic cracker (FCC) margins since that time.

Viewpoint: Europe fuel oil battles IMO headwind
The tightening global supply of fuel oil will continue to support prices and keep crack margins strong in northwest Europe during much of the first half of 2019. But high-sulphur fuel oil (HSFO) prices may start coming under pressure as early as the second quarter, as the effect of International Maritime Organisation (IMO) limits on sulphur content in shipping fuels from 2020 becomes more pronounced.

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Viewpoint: Europe Suezmax, Aframax markets challenged
Record-high freight prices in Suezmax and Aframax markets towards the end of 2018 boosted shipowner earnings after a disappointing start to the year. But net global fleet growth, looming International Maritime Organisation (IMO) regulations and Opec production cuts will challenge tanker markets in the coming six months.

Viewpoint: Japan’s LPG sector eyes bunker market
Japan's LPG industry is looking to the marine fuel sector as a new source of growth, as demand for the product from established consumers continues to stagnate. The planned introduction of stricter rules for marine fuel emissions, and the government's support for advanced vessels, are also drawing more LPG firms into the bunker sector.

Viewpoint: Jones Act market eyes WTI for 2019
Rising US oil output from the Gulf coast and limited domestic pipeline capacity may absorb the abundance of US-flag shipping capacity delivered from shipyards in 2015-2017.

Viewpoint: Midcon refiners readied for IMO rules
Refiners in the US midcontinent appear well-positioned to take advantage the arrival of new International Maritime Organization (IMO) sulphur regulations in 2020, having performed extensive maintenance on distillate-producing units during this fall's turnaround season.

Viewpoint: New fuels coming for European marine use
New fuels compatible with the International Maritime Organisation's (IMO) 0.5pc marine fuel sulphur cap should become more prevalent in the first half of 2019, with shipowners eager to gain operational experience.

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Viewpoint: Opec cuts, new ships to weigh on VLCC market
Mideast Gulf very large crude carrier (VLCC) freight rates are likely to retreat in 2019, as Opec production cuts and sustained high delivery levels of new-build tankers erode recent strength.

Viewpoint: Tough 2019 for Asia long-range tanker market
The east of Suez long-range (LR) tanker market faces a challenging 2019, as the US-China trade war and the pending International Maritime Organisation (IMO) regulations on marine fuel sulphur content disrupt trade flows and add to costs.