HSBC Global Research said new regulations from the International Maritime Organisation - commonly referred to as IMO 2020 - will require a drop in the sulphur content in marine fuels globally from 3.5% to 0.5% from 1 January 2020. This change will have a material and potentially disruptive impact on the global refining and shipping industries.
The research house noted that international maritime transport represents 4.4mbd or 4-5% of global oil demand.
HSBC believes the transition to clean marine fuel will create several years of strong margins for complex refiners and drive big structural changes in the shipping and shipbuilding industries. In refining, HSBC sees a multi-year bonanza for those that invested early. Diesel/
gasoil prices should rise to premiums to historic norms, while high-sulphur fuel oil (HSFO) prices will weaken significantly. There will need to be a dramatic re-configuration of the global refining industry, and the winners will be complex refiners with the right conversion capacity.
For the shipping industry, cleaner fuels are likely to be in short supply from the start, while a significant amount of dirty fuel will be left unsold. The research house sees an increase in oil trading will greatly affect the market for tankers, notably in the form of strong demand for new vessels.
For global crude markets, IMO 2020 is another prospective disruption in a highly uncertain outlook, as HSBC expects refiners to increase utilisation to close the clean product deficit, creating incremental crude demand.
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