demand is about to get a boost from a rule that’s supposed to help the
environment, Bloomberg says.
refineries will need to process about 700,000 barrels a day more oil by next
year directly as a result of a rule to cut the maritime industry’s sulfur emissions, according to refining analysts interviewed by
Bloomberg. The extra supplies mightn’t be easy to
find in a market where OPEC and allied producers are removing millions of
barrels of supply, and may extend their curbs.
will ramp up starting in the third quarter of 2019, and rise through the fourth
quarter,” said Eleanor Budds, Paris-based associate director for oil markets,
midstream and downstream at IHS Markit Ltd.
From January, ships will
have to lower the sulfur content in their fuel to 0.5 percent, down from 3.5 percent in most parts
of the world today. Alternatively, they can fit kit called scrubbers that
stops airborne release of the pollutant.
dioxide has been blamed for exacerbating health conditions such as asthma, as
well as environmental concerns like acid rain. Despite the rules entering into
force in January 2020, vessel owners are expected to start getting ready
beforehand. That means demand for the new fuels will start accelerating later
— and one reason crude demand is expected to gain — is that refineries will
have to start making more diesel-like products to cover a shortfall of
residue-based marine fuel that’s expected to emerge. And to achieve that, they
will have to run harder.
“We can expect year-on-year crude run
increases to start to gather pace as we move out of the maintenance season over
the next couple of months,” said Jonathan Leitch, research director for
refining and oil product markets at Wood Mackenzie Ltd., an industry
consultant. “Refiners are well aware of the upcoming changes and will be
looking to capture as much margin as possible from the disruption.”
expectation is that the ramp up in processing rates won’t last. Budds says the
impact should diminish in 2021 and 2022.
Mackenzie forecasts a gain of 700,000 barrels a day for refineries next year as
direct result of IMO 2020, while Facts Global Energy is anticipating growth “towards
the higher end” of a 500,000 barrels to 1 million a day range. Both firms say
the ramp up should start to happen in the second half of this year.
refining industry won’t be able to produce enough low sulfur residual marine
fuel, so it will have to make more marine gasoil to cover the shortfall,” said
Jan-Jaap Verschoor a director at Oil Analytics, which tracks margins for
hundreds of refining configurations worldwide. “The only way to do that in the
short term is to ramp up run rates.”
estimate is that the IMO rule could boost processing rates by between 1 million
to 2 million barrels a day.