The introduction of the global IMO 0.5pc sulphur cap for marine fuels is finally here. After several years of debate regarding the potential impact across the refining and shipping industries, we are now beginning to see things unfold.
To help get to grips with the wide-reaching implications of the biggest specification change in recent history, the Argus Editorial team has created a series of Viewpoint articles.
Argus IMO 2020 Newsletter
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Marine fuels
Viewpoint: IMO 2020 to have delayed price effect
The fuel oil market is not likely to see large price swings with new marine fuel sulphur regulations that took effect at the beginning of 2020, given minor price changes for the compliant fuel in the weeks leading up to the change.
Viewpoint: Sulphur cap to support 0.5pc fuel oil
Strong demand for fuel oil with a maximum sulphur content of 0.5pc will support refining margins for the product in Europe in the first half of 2020, but sustained Russian levels of production of high-sulphur fuel oil (HSFO) are likely to pressure margins as the International Maritime Organisation's (IMO) 2020 sulphur cap comes into force.
Viewpoint: 0.5pc fuel oil primacy to prolong tightness
As 0.5pc sulphur marine fuel oil (0.5pc fuel oil) looks to be the low-sulphur fuel of choice, tight availability of the new grade in Mediterranean ports will continue into 2020 while supply will be more steady in northwest Europe.
Viewpoint: LSFO Prices and demand to continue to rise
Uncertainty around supply and specifications for 0.5pc sulphur residual fuel oil may drive some shipowners to use 0.1pc sulphur marine gasoil (MGO) to meet new fuel rules, but MGO's traditional premium will likely continue to put it at a disadvantage.
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Refined products
Viewpoint: IMO to support refining margins in 2020
Wider middle distillate and gasoline cracks will support higher European refining margins in 2020 compared with 2019.
Viewpoint: IMO offers only hope for gasoil demand
European diesel margins are likely to remain relatively low in the coming months as demand continues to face headwinds, but new marine fuel regulations offer some chance of support depending on how the shipping industry adapts.
Viewpoint: Gasoline looks to IMO, exports for balance
Although unlikely to outperform other products, the outlook for European gasoline is positive into 2020 as the International Maritime Organisation (IMO) tightens output and transatlantic demand continues to take a greater share of exports. Fundamental changes in the way gasoline is traded are likely to take shape.
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Freight
Viewpoint: Fleet growth, IMO to drive Suezmax, Aframax
Suezmax and Aframax tanker deliveries quickened and scrapping levels stalled in 2019, and this additional supply and an ample order book is likely to weigh on freight rates for the two classes in 2020, particularly as the production-cut extension by Opec and its partners will again limit tanker demand.
Viewpoint: IMO 2020 to lift European clean freight
Product tanker rates are likely to increase year on year in the first half of 2020 as the International Maritime Organisation's (IMO) 2020 sulphur cap could boost middle distillates trade movements and compatibility and fuel sourcing issues could cause logistical disruptions.
VGO
Viewpoint: VGO sulphur spread may widen in 2020
Low-sulphur vacuum gasoil (LSVGO) is likely to gain higher premiums next year as bunker fuel blenders compete with refiners, which could potentially force fluid catalytic cracker (FCC) run cuts.
Viewpoint: European VGO market in line for shake-up
The European vacuum gasoil (VGO) and straight-run fuel oil markets are entering uncharted territory as the new year approaches.
Crude oil
Viewpoint: Med sweet crude to get 2020 IMO boost
Marine-fuel sulphur legislation will support demand for Mediterranean-region light sweet crudes in 2020, when access to sour crudes will be reduced by Opec output restraints and Mideast Gulf producers' focus on Asia-Pacific sales.
Viewpoint: IMO 2020 may slow Ecuador loan repayment
Possibly narrower differentials for sour crudes — under pressure from looming emissions regulations — could slow Ecuador's repayment of its oil-backed debt and limit availability for spot market exports in the first half of 2020.