High sulphur fuel oil demand to crash by 2.1m barrels per day, says IEA

Singapore to tighten controls in marine fuels supply chain
Illustrative picture. PHOTO CREDIT: SHIPS & PORTS archive

The International Energy Agency (IEA) says demand for high sulphur fuel
oil will drop from its present level of 3.5 million barrels per day (mb/d) to 1.4 mb/d next year due to the new 0.5 percent sulphur content cap in shipping fuel set by the International Maritime Organisation (IMO).

In its annual oil market forecast released on Monday, IEA said as a result of the IMO sulphur cap, demand for marine gasoil (MGO) will more than double in 2020.

The agency attributes the hike in demand for marine fuel to the reluctance of some shipping companies to use the very low sulphur fuel oil (VLSFO) immediately because of availability concerns.

It said, “Some shipping companies may also be reluctant to adopt a new
fuel immediately, and would prefer to use MGO until they have confidence
that VLSFO will be easily available in ports and stable and compatible
with similar grades.”

IEA in the report estimates that about 4, 000 scrubbers will be installed on large vessels by the end of 2020 as a result of the ban on HSFO, consuming around 680,000 bpd of fuel oil on average, up from 340,000 bpd in 2019.

As HSFO demand drops, the IEA expects the unwanted product to be used for cement plants and power generation particularly in the Middle East, where 11 gigawatts of new power capacity is being installed, mainly in Saudi Arabia.

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