The IMO’s sulphur cap will drive a spike in global oil demand in 2020 according to a new OPEC report, with significant non-compliance and widespread scrubber use inflating marine demand for high-sulphur fuel oil.
According to the World Oil Outlook 2018 report published by the Organisation of Petroleum Exporting Countries (OPEC), incremental demand for oil in 2020 will bounce up to +1.7 million barrels per day (mb/d) from +1.4 mb/d next year – reversing a steady decline in demand growth – because of the way in which refiners will meet demand for low-sulphur marine fuels.
The report argues that refiners will not be able to supply sufficient fuel only by adjusting yields at the different stages of the refining process. They will also need to increase refining runs to produce more middle distillate, which will be blended with high-sulphur fuel oil (HSFO) to make compliant 0.5% sulphur fuel. This and the volumetric gains of producing more diesel – which will be required to guarantee availability of compliant fuel in the short term – will be responsible for the spike in demand.
The spike is expected to be short lived, with incremental global oil demand dropping to +0.9 mb/d in 2021 and shrinking every year thereafter. This corresponds with an increase in the uptake of scrubbers, driven by the cheap availability of surplus HSFO resulting from increased refining runs in 2020. OPEC anticipates that 5,000 ships could be fitted with scrubbers by 2023, up from 2,000 in 2020.
Significant non-compliance will also keep demand for cheap HSFO high; OPEC estimates that around 30% of ships will not comply when the IMO rules are introduced, dropping to 10% by 2023 as scrubbers become more widespread.
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