OPEC predicts oil surge amid sulphur changes
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.
The view that emerges is of demand for HSFO in shipping – currently 80% of the sector’s fuel – falling back in 2020 as diesel is used as a stop-gap compliance measure (with diesel representing 40% of shipping demand in that year), then growing again as the price advantage encourages shippers to deploy scrubbers. By 2040, OPEC believes that demand for HSFO will account for more than 4.2 mb/d, or 83% of shipping’s fuel mix.
The perspective on the market is a counterpoint to that offered by some analysts in the industry that only early movers will benefit from scrubber installations. OPEC projects that the case for scrubbers will be strongest from 2020 onwards, after surplus HSFO is created in the extra refining runs needed to create compliant blends.
In total, OPEC projects that oil demand in the marine sector will rise from 4 mb/d in 2017 to 5.1 mb/d by 2040. Representing an increase of more than 25% in oil consumption over the next 23 years, and a corresponding increase in CO2 emissions, the forecast casts doubt on IMO’s greenhouse gas reduction target of cutting emissions by 50% by 2050 (compared to 2008 levels).
The report can be downloaded here.
LATEST PRESS RELEASES
Chevron Marine Lubricants to put Global Sulphur Cap and cylinder oil lubrication in the spotlight at Nor-Shipping 2019
Chevron Marine Lubricants will use this edition of the Nor-Shipping international maritime trade sho... Read more
DESMI Ocean Guard wins Frame Agreement for Supply of Ballast Water Management Systems for the Existing Fleet of French Company Sea Tankers
Aalborg, DK, May 7, 2019 – DESMI Ocean Guard A/S is pleased to announce that Sea Tankers have select... Read more
Vickers Oils has opened its 1,700 square metre state-of-the-art R&D laboratory, as well refurbishing... Read more
Gloryholder has been awarded the contract to design and supply the LNG cargo handling and fuel gas s... Read more
DESMI Ocean Guard’s CompactClean Ballast Water Management System Receives US Coast Guard Type Approval
Aalborg, DK, April 17, 2019– DESMI Ocean Guard A/S is pleased to announce that its CompactClean Ball... Read more