Marine fuels

New International Maritime Organization rules slashing allowable sulfur content in bunker fuels come January 2020 are expected to be a boon to complex refineries with coking units that can break residual high-sulfur fuel oil (HSFO) into low-sulfur middle distillates and other high-value products. The IMO rules also are expected to undermine the already shaky economics of many simpler refineries that don’t have cokers and are therefore left with a lot of residual HSFO. Today we conclude our blog series on the far-reaching effects of the new cap on bunker fuel sulfur content with a look at how the IMO rules will create winners and losers among refineries, and improve diesel refining margins.

Much tougher rules governing emissions from ships plying international waters soon will force wrenching change on the energy industry. Demand for high-sulfur fuel oil is expected to plummet; ditto for HSFO prices. Demand for low-sulfur distillates from the shipping industry will rise sharply, putting upward pressure on prices for marine gas oil, marine diesel oil and ultra-low-sulfur diesel. These demand and pricing shifts, in turn, will have a number of significant effects on refiners. Today we continue our series on the far-reaching effects of the International Maritime Organization’s (IMO) mandate to slash emissions from tens of thousands of ships starting in January 2020.

A new international rule slashing allowable sulfur content in the marine fuel or “bunker” market will have profound effects on global demand for high sulfur fuel oil and low-sulfur middle distillates—and with that, major impacts on the price of those products, the demand for various types of crude, and the need for refinery upgrades. What we have in the making here is a refining-sector shake-up that will extend well into the 2020s. Today we begin a series on the rippling effects of the International Maritime Organization’s (IMO) mandate that, starting in January 2020, all vessels involved in international trade use marine fuel with sulfur content of 0.5% or less.