Asia (Region) IMO 2020: Impacts Muted, Some Risks Remain

摘要

IMO 2020 implementation is reshaping marine fuels demand, as ship owners switch to low sulphur fuels to move into compliance with the cap. This is driving strong diferentials on very low sulphur fuel oil (VLSFO) and marine gas oil (MGO), at the expense of high sulphur fuel oil (HSFO). In Asia, shipowners have shown a preference for VLSFO, driving the fuel into a sustained premium above MGO, in stark contrast to other regions. Much of this refects distortions created by China and is unlikely to like to last. Although we see potential upside to MGO demand, we have pared back our expectations for 2020 growth, with VLSFO set to take a larger share of the pie. The boost to crude demand also appears softer than we had initially anticipated, which will cap any gains in the oil price. This will be a welcome relief to refners, which face a growing glut in the global products market. Complex refners remain well placed to proft from the broader shift in global fuels demand towards higher quality, less pollutive fuels. However, we expect that the light-heavy crude oil diferential will remain well contained this year, dampening their performance on a relative basis.