Weakening export demand for US-made products is skewing the impact of the change to cleaner ship fuel on US refined products as marine gasoil prices fall and cracks widen ahead of the IMO’s mandated January 1, 2020, deadline to reduce sulfur content to 0.5% from 3.5%.

The imposition by the Trump Administration of tariffs on China is having an impact on port activity, and the slowing of global trade and US exports is keeping distillate prices below where US refiners thought they would be just under four months before the deadline imposed by the International Maritime Organization.

Fewer US products are making their way abroad, according to container export data from the ports of Houston, Long Beach, California, and New York and New Jersey.

This lack of US exports and resulting weak economic growth are helping push down the price of marine gasoil, the current go-to fuel for ship owners ahead of the deadline mandated by the International Maritime Organization for IMO 2020 deadline.

Regardless, the heady refining margins expected by US refiners has yet to materialize, although most feel it is on the horizon as the deadline draws near.

“We are starting to see movement, albeit relatively light,” said Tom Nimbley, CEO of PBF Energy on the August 1 second quarter results call.

“We expect to see even more activity as we approach the fourth quarter, and January 1, 2020, does put a line in the sand.”

However, other factors have come into play which are also keeping the price spread between cleaner fuel and heavier fuel narrower than expected.

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