According to Boston Consulting Group, IMO’s 2020 sulphur cap will lead to a one to five year disruption in oil and refined products markets. This switch could benefit refiners, producers of shale oil and would reduce prices of HSFO or bunker fuel with a maximum sulphur content of 3.5%.
Namely, IMO will mandate ships to use fuels with a sulphur content below 0.5%, compared with 3.5% which is now.
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Now, Boston Consulting Group said that this regulation would benefit refiners, as well as producers of shale oil, which has a lower sulphur content than other varieties. Moreover, HSFO prices or bunker fuel with a maximum sulphur content of 3.5%, would fall as demand erodes.
In fact, the prices for crude oil from shale fields will experience benefit from the transition, while a price premium will increase because of a sulphur concentration.
This disruption could last for 1 to 5 years. According to Reuters, the 1-year disruption could take place if the IMO would postpone the start to 2022. This would enable refiners and shippers to have more time to prepare for the change.
The 5-years period would take place if the another recession takes place and shippers widely do not comply with the regulation. This would narrow the expected price spread between HSFO and VLSFO.
