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IMO's commitment to VSLSO from 2020-I: What are the implications for the product tanker industry?
Mar 13: This week the IEA released its influential ‘Oil 2018’ report, which analyses oil market developments to 2023. This is the first edition of the report to be released since the IMO committed to the 1st of January 2020 implementation date for full introduction of very low sulphur fuel oil (VLSFO) for the shipping industry. The IEA has thus been forced to offer their view of how the market will evolve.
8Come 2020, the agency expects a near 1 million b/d swing from high sulphur fuel oil (HSFO) to marine gasoil (MGO). Interestingly, the IEA has assumed a large uptake in a new 0.5% fuel oil blend,
named VLSFO, which they estimate will take nearly another 1 million b/d of demand away from HSFO.
8The result is of course, a near 2 million b/d decline in HSFO demand.
8For tankers in the fuel oil trade this may of course seem alarming to see such large volumes of fuel oil demand stripped from the market.
8Yet, VLSFO will be carried on dirty tankers, reducing the demand shift to clean from dirty products to 1 million b/d.
8Furthermore, the IEA estimate that from 2020 to 2023, VLSFO will claw back market share from MGO, with eventual VLSFO demand of approximately 2 million b/d, complimented by 1 million b/d of ‘scrubbed’ (or non-compliant?) HSFO demand.
8In effect, this returns the clean/dirty bunker demand split to where it was prior to 2020, but with VLSFO having taken share from HSFO.
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