BAKU, Azerbaijan, Feb.3
By Leman Zeynalova – Trend:
In 2021, marine fuel demand will benefit from broad-based economic recovery and a pickup in international trade, Trend reports citing Fitch Solutions.
“Marine fuel prices will find further support in rising crude prices and firming product crack spreads. Following an average of USD43.2/bbl in 2020, we forecast global benchmark Brent crude to rise to an average of USD53.0/bbl this year. As fuels prices broadly track the movements in crude prices, this signals further gains for marine fuels in general. In addition, in line with the pickup in demand, product cracks are expected to firm over the coming quarters, adding further impetus to the rise in prices for very low-sulphur fuel oil (VLSFO) and marine gas oil (MGO),” the company said in its latest report.
That being said, the global refining sector sees severe overcapacity, according to Fitch Solutions.
“We expect that marine fuels demand will continue to grow robustly across the 10-year forecast period. However, the pace of growth will slow, alongside rising fuel efficiency and a switch to alternative energies. The International Maritime Organization (IMO) is tightening its environmental targets, in efforts to cut emissions in the shipping sector by 50 percent by 2050, versus a 2008 baseline. While these measures are highly positive for the energy transition, they will not in and of themselves be sufficient for the IMO to reach its 2050 target and, as such, we expect further energy efficiency and broader emissions reductions measures to be brought into place over time, posing additional downside risk to the longterm demand outlook.”
Fitch Solutions has grown more bearish on the prospects for high-sulphur fuel oil, due to more clouded prospects for the uptake of scrubbers. “Following the implementation of the IMO’s new sulphur regulations in January 2020, only vessels with exhaust gas cleaning systems (i.e. scrubbers) installed are allowed to burn fuel with a sulphur content above 0.5 percent mass-by-mass. Since March, there have also been restrictions on the carriage of high-sulphur fuel oil (HSFO) on vessels without scrubbers.
Enforcement of the new regulations has been strong and non-compliance appears low, leading to large-scale demand destruction for HSFO. A part of this demand will be recouped as more ships install scrubbers. However, the prospects for scrubber installation have deteriorated. In part this relates to VLSFO. Many of the potential issues around the availability, compatibility and stability of the fuel have not materialised and so VLSFO has taken on a larger-than-expected share of marine demand. Moreover, the spread of high-to-low sulphur fuels has fallen steeply in2020, as VLSFO production has grown, while the supply of HSFO has been tighter than anticipated.
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