Despite initial concerns about availability of very low-sulphur fuel oil (VLSFO) late last year, the preferred compliant marine fuel supplies at key hubs now seem adequate, according to the International Energy Agency (IEA).
What is more, concerns that the VLSFO, which is a blend of high-sulphur and low-sulphur fuel, could damage engines are now less prominent.
The IEA said that
We are starting to see the first data on the transition and, it appears that deliveries of the new VLSFO bunkers are increasing fast.
Notably, according to Reuters, the strong demand for VLSFO has led to a sharp increase in its price in recent months which sharply narrowed its spread with the more expensive marine gasoil. Thus, refiners around the world have responded by boosting VLSFO production.
In light of the 2020 Sulphur cap, the shipping industry along with the oil and gas sector are preparing for the future changes. Reuters has previously presented a summary of how the top global refiners are getting ready for the fuel switch.
Previously, the International Energy Agency, has informed for high-sulphur fuel oil demand will reduce 60% in 2020, as marine gasoil demand would double because of upcoming international regulations on shipping fuel.
More specifically, it was then said that a fuel type aiming to comply with the new cap, very low sulphur fuel oil (VLSFO), would at first be in limited supply, and quality discrepancies at different ports would mean that operators could use another compliant but more expensive fuel, marine gasoil.
Under this light, IEA forecasted VLSFO demand to reach 1 million bpd in 2020 and 1.8 million bpd by 2024, while marine gasoil demand would peak in 2020 and reduce to 1.8 million bpd by 2024.