IMO 2020 regulations to destroy much of global demand for high sulphur fuel oil

IMO 2020 regulations to destroy much of global demand for high sulphur fuel oil

BAKU, Azerbaijan, Jan.18

By Leman Zeynalova – Trend:

The recovery in global oil demand will disappoint expectations, with growth set to stabilize, but remaining weak,Trend reports citing the outlook released by Fitch Solutions Macro Research (a unit of Fitch Group).

The implementation of the International Maritime Organization’s (IMO) 2020 regulations will trigger a major shake-up of the marine fuels demand basket, destroying much of the global demand for high sulphur fuel oil, while boosting the call on low sulphur alternatives, according to the company.

From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas is envisaged to be reduced to 0.50 percent m/m (mass by mass). This will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.

Fitch Solutions believes that gasoline demand will stage a recovery, but continued drags on autos sales will cap growth to believe historical averages.

"Refining capacity growth is set to peak in 2020, with over 2.5 million barrels per day due on stream. Capacity growth will dwarf the growth in the demand, putting pressure on refining margins and driving utilization lower. As the current capex cycle rolls off, the focus of investment will shift from greenfield to brownfield, as refiners seek to equip legacy facilities to meet tightening environmental policies and evolving demand for fuels," said the company.

The demand growth forecasts of Fitch Solutions sit significantly below consensus for 2020.

"Key forecasting agencies place growth in the range of 1.1-1.2 million b/d, almost 50 percent higher than the 660 b/d that our data suggest. As such, we believe market expectations for demand will be largely disappointed in 2020. The relatively lacklustre uptick in growth we forecast next year rests on several assumptions. In 2019, oil demand has faced headwinds from both the top down and bottom up. Top down, the biggest drag on growth has been the deceleration in economic activity and, relatedly, the US-China trade war," reads the report.

Fitch Solutions economists expect that economic and trade growth will broadly stabilize next year, which should put a floor under demand, but which offers little upside. "The phase one trade deal recently brokered between Washington and Beijing has somewhat improved prospects, but question marks remain about the deal’s implementation."

"A number of major consumer markets have also faced localized drags on growth in 2019, including US sanctions, popular protests, subsidy reforms and other political and regulatory changes. On balance, our country level analysts expect these drags to ease next year. That said, in few markets do we expect a major rebound. There also remains the risk that a number of these drags spill over into the coming quarters. This was aptly demonstrated by India’s ongoing economic woes, which recently triggered a 95,000 b/d downgrade in our oil demand growth forecast for 2020.

The International Maritime Organization’s 2020 sulphur cap becomes effective January 1. The cap will reduce the allowable sulphur content in marine fuels outside of emissions control areas from 3.5 percent mass-by-mass currently, to 0.5 percent. The regulation is set to trigger a major swing in marine fuels demand, away from high sulphur fuel oil (HSFO), towards low sulphur fuel oil (LSFO) and marine gas oil (MGO). The uptake of scrubbers (which allow vessels to continue burning HSFO) has accelerated rapidly in recent quarters, but is likely to represent less than 5 percent of the number of active vessels and less than 10 percent by tonnage.

"Non-compliance will likely be an issue in the initial stages and capacity for and willingness to enforce the cap will vary considerably between different flag states and port authorities. Nevertheless, we expect overall compliance will be high (8 5 percent+) and is likely to strengthen after new restrictions on the carriage of HSFO on vessels not equipped with scrubber capacity come into force in March 2020."


Follow the author on Twitter:@Lyaman_Zeyn

Second batch of Sputnik V vaccine expected to be delivered to India by end of the week
Second batch of Sputnik V vaccine expected to be delivered to India by end of the week
Russia reports 9,462 daily COVID-19 cases
Russia reports 9,462 daily COVID-19 cases
Sputnik V approved for use in Republic of Maldives
Sputnik V approved for use in Republic of Maldives
Loading Bars
U.S. city Columbus agrees to pay 10 mln USD to family of unarmed black man killed by police
3 rockets fired from Syria toward Israel
Indonesia reports 2,633 new COVID-19 cases, 107 new deaths
Turkey reports over 14 400 COVID-19 cases)
New project 'Log in Georgia' to give access to high-speed internet to people in rural areas
Head of Kazakhstan holds meeting with World Bank Vice President for Europe and Central Asia
Lithuanian company launches innovative complex solution in Azerbaijan's financial sector
5.2 mln Ethiopians in restive northern region need food aid - UN
Improved coronavirus conditions lead to further relaxation of restrictions in Cyprus
Israel's annual inflation up 0.8 pct, highest in nearly 2 years
Chairs of Azerbaijani Parliament, Turkish National Assembly talk issues of mutual interest
COVID-19 kills 202 more Iranians over past 24 hours
Lithuania gifts 15,000 Covid-19 vaccines to Georgia
Turkey to gradually relax COVID-19 measures, normalcy in June
President Tokayev receives Finnish Minister for Development Cooperation and Foreign Trade
First Vice-President Mehriban Aliyeva made another post from Karabakh (PHOTO/VIDEO)
Germany's COVID-19 incidence rate drops below 100 for first time in two months
Georgia updates environmental targets with support from EU4Climate project
Azerbaijani FM, high-ranked EU official discuss Armenian-Azerbaijani border situation
Extra costs to air fares for PCR testing almost double flight cost - IATA
SOCAR to supply Rosneft’s oil products to Baltic states, Ukraine, Poland
Google leads U.S. business push to preserve work permits for H-1B spouses
Production of electric cars in Iran needs more motivation - ministry official
Azerbaijan, US exchange views on Armenian-Azerbaijani border situation
Azerbaijan shares data on number of vaccinated citizens for May 14
Georgia negotiating with South African, Polish companies to manufacture military UAVs
Second batch of Sputnik V vaccine expected to be delivered to India by end of the week
London May cocoa expiry sees 72,230 tonnes tendered
Azerbaijan confirms 326 more COVID-19 cases, 1,262 recoveries
Azerbaijan names date of issuing tickets for UEFA EURO 2020 matches in Baku
Afghan president calls Azerbaijani president
Wizz Air joins airlines cancelling Tel Aviv flights
Georgia receives financing from WB toward cost of energy supply reliability
More Azerbaijani enterprises to export tomatoes to Russia
'Lancet report on India COVID-19 response another attempt to undermine developing country's ability to challenge big pharma's monopoly'
Kazakh telecommunications company opens tender to buy station for wells management
Russia reports 9,462 daily COVID-19 cases
Azerbaijani MoD names number of commissioned military units in liberated areas (PHOTO)
Total assets of INPEX rise in Q1 2021
INPEX sees decrease in net natural gas sales
INPEX Corporation increases net sales of crude oil
Turkish company Chalik Holding to build new wind farm in Georgia
No oil deliveries planned from Azerbaijan to Belarus in May
Revenues of Azerbaijan State Maritime Agency decrease
Kazakhstan's ERG eyeing more investments into future projects
Kazakhstan sees decrease in trade with Netherlands
Kazakhstan, France discuss fuel energy cooperation prospects
Georgia reports 1,390 new cases of coronavirus for May 14
France's Macron to go down in history as killer of OSCE Minsk Group
Airbnb bookings jump 52% as vaccinations spur vacation rental demand
SOCAR ready to share capacity of Southern Gas Corridor with Turkmenistan
Kazakhstan decreases exports to Hungary
Azerbaijani oil prices decline
Russian IrAero to launch flights to Azerbaijan soon
Zulfiya Khanbabayeva to be the next narrator of Nar's ‘Reading hour’ project (PHOTO)
Apple supplier Foxconn reports Q1 profit T$28.2 bln, beats estimates
Kazakh gas supply company opens tender for pipeline maintenance
Georgia reveals rating of its largest wine and spirits companies
Georgian Geofresh company eyes Europe, Dubai to expand exports
Georgian Adjara creating new platform for tourism development
Turkey discloses number of ships received by Tuzla port
Turkish ministry discloses volume of cargo handled through Bartin port
Sweden, WB supporting Georgia by addressing wastewater treatment challenges
IMF underlines successfully completed four-year extended program in Georgia
Georgia considers opening of land borders
UN Secretary General calls for immediate cessation of hostilities in Gaza Strip and Israel
Kazakhstan requires sustainable management practices for natural resources - UNIDO
Iran’s FM meets with Spanish counterpart
Kazakhstan reports 2,549 more COVID-19 cases, total at 353,140
Turkey reports 11,534 new COVID-19 cases, 5,083,996 in total
6.0-magnitude quake strikes off Japan's Fukushima Prefecture, no tsunami warning issued
Colonial Pipeline restarts entire pipeline system - company statement
Hamas launches 100 more missiles in direction of Ashkelon
More than 745,000 COVID-19 infections detected worldwide over past 24 hours - WHO
UN Security Council to hold open session on Israel and Gaza Strip on May 16
Oil prices drop as U.S. pipeline resumes operations
Latvia eases entry rules for vaccinated travelers
Three rockets launched toward Israel from Lebanon, no damage -Israeli military
Africa's COVID-19 cases surpass 4.66 mln
Over 500 residential buildings razed by Israeli airstrikes in Gaza Strip
Azerbaijani Foreign Ministry issues statement on tension on Armenian-Azerbaijani border
China's Qinghai donates anti-pandemic supplies to Kyrgyzstan
Azerbaijani FM talks tension on Azerbaijani-Armenian border with OSCE Chairman-in-Office
Georgian's commercial banks see increase in number of total loans
Azerbaijani, Russian FMs exchange views on tensions on Azerbaijani-Armenian border
Overseas election headquarters established at Iran’s foreign ministry
Sputnik V approved for use in Republic of Maldives
Azerbaijan shares data on number of vaccinated citizens for May 13
Azerbaijan confirms 509 more COVID-19 cases, 1,427 recoveries
COVID-19 cases decrease in 80 Turkish provinces in a week
Tajikistan delegation to visit Uzbekistan on May 14
Gaza death toll jumps to 84 as Israeli air raids intensify
Musk decries bitcoin's 'insane' energy use after Tesla payment U-turn
Azerbaijani president got touched by National leader Heydar Aliyev's words about Shusha (VIDEO)
Azerbaijani president once again says at Jidir Plain in Shusha - Karabakh is Azerbaijan! (VIDEO)
EU countries urged to halt non-essential travel from India
U.S. weekly jobless claims fall
Gaza flare-up further weakens shekel
Georgia increases aviation fuel imports
Iran ready to have closer ties with Saudi Arabia, FM says
All news