New shipping fuel rules will lead to a sharp increase in demand for distillates, but that demand will fall off quickly, the International Energy Agency (IEA) has claimed.
Speaking earlier this month the IEA said that the new rules implemented by the International Maritime Organization (IMO) would significantly cut the amount of sulphur that the world’s ships can burn in their engines from 2020, leading to a close to 1m bpd rise in gasoil consumption, with a concomitant decline in the use of high-sulphur fuel oil.
The IEA noted that, while ships could continue to burn higher sulphur fuel if they installed scrubbers, and could also use LNG-powered engines or new low-sulphur fuel oil blends, a lack of preparation had led most to expect a dramatic boost in marine gasoil consumption, simply because it is the easiest option available.
In a five-year outlook the IEA said that gasoil consumption would rise by nearly 1m bpd to 1.7m bpd from 2019 to 2020, it would fall back to its previous level. “After a strong increase in 2020, marine gasoil demand will return to its 2019 levels by the end of the forecast,” the IEA said. It predicted that most shippers would turn to new 0.5% fuel offerings as they become more confident of their quality.
Many oil majors have already invested in upgrading their refineries to produce more low-sulphur fuels, and trading house Gunvor has received permission to upgrade its Rotterdam refinery, but the IEA warned that some simple refineries could be forced to shut down if they do not upgrade.