High-sulphur fuel oil demand will reduce 60% in 2020, as marine gasoil demand will double because of upcoming international regulations on shipping fuel, according to an International Energy Agency forecast.
A new 0.5% sulphur content cap in shipping fuel will apply in 2020.
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A fuel type aiming to comply with the new cap, very low sulphur fuel oil (VLSFO), will at first be in limited supply, and quality discrepancies at different ports will mean that operators could use another compliant but more expensive fuel, marine gasoil, Reuters reports.
Under this light, IEA forecasts VLSFO demand to reach 1 million bpd in 2020 and 1.8 million bpd by 2024, while marine gasoil demand will peak in 2020 and reduce to 1.8 million bpd by 2024.
In addition, a slight reduction in marine gasoil supply during 2020 could increase by as much as a fifth, assuming an important level of non-compliance, along with a draw on gasoil stocks of about 200,000 bpd.
Scrubbers could be one solution, enabling ships to continue burning cheaper HSFO. Namely, IEA expects that about 4,000 scrubbers will be installed by 2020, consuming about 680,000 bpd of fuel oil on average, increasing from 340,000 bpd in 2019.
Moreover, as HSFO demand decreases, IEA expects the unwanted product to be used for cement plants and power generation especially in the Middle East, where 11 gigawatts of new power capacity is being installed.
However, the agency believes that there will be a significant level of non-compliance in the first year of the new regulations, as there will not be enough VLSFO. It also expects non-compliant vessels to account for 16%, or 700,000 bpd, of HSFO demand.
Considering what the situation will be in 2024, annual gasoil demand growth will grow to 0.9%, while marine demand will also increase at a rate of 12.7% annualy.
Finally, refiners could increase their gasoil output by 2.3 million bpd by 2024.
