trending Market Intelligence /marketintelligence/en/news-insights/trending/xjXNWDhJQgqgu2nsjUj3aQ2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Slowing economic growth could limit price impact of marine fuel sulfur standards

As COVID-19 Wears On, Regulators Examine Moratorium Extensions, Cost Recovery

Essential Energy Insights - June 11, 2020

Webinar Replay

Deep Dive on Oil & Gas for Financial Institutions

Essential Energy Insights - May 28, 2020


Slowing economic growth could limit price impact of marine fuel sulfur standards

Three weeks before tighter marine fuel sulfur standards go into effect, a panel of experts told U.S. senators that slower-than-expected global economic growth could moderate the rule's impact on crude oil and petroleum markets.

The International Maritime Organization, or IMO, will lower the marine fuel sulfur cap from 3.5% to 0.5% on Jan. 1, 2020. Previously, experts had said the regulation would result in a 20% shift in the high-sulfur fuel oil market to drive a steep increase of more than 1.4 million barrels per day in distillate demand. In September 2018, Valero Energy Corp. CEO Joe Gorder said the rule could yield "billions of dollars in incremental EBITDA," but refining executives were more guarded in their remarks during third-quarter earnings calls about the timing and duration of the rule's impact.

At a Dec. 10 hearing of the U.S. Senate Energy and Natural Resources Committee, U.S. Energy Information Administration administrator Linda Capuano said the regulations should lead heavy, sour grades of crude oil to trade at a discount to light, sweet crude oil as refiners seek feedstock to produce low-sulfur fuel oil, but Capuano also projected that slowing global GDP growth will put downward pressure on worldwide oil and petroleum prices.

"Because the retail prices that consumers pay are a function of both crude oil prices and refining margins, we expect that generally lower crude oil prices in 2020 will mostly offset the effects of the higher refining margins related to the regulations," Capuano said. "Prices at the pump for gasoline and diesel next year will be similar to prices in 2019."

"The IMO change is not taking place in isolation," ClearView Energy Partners Vice President Neelesh Nerurkar told the Senate committee Dec. 10. "Trade tensions and a global economic slowdown have dampened oil demand growth and offset what might have otherwise been a more significant low sulfur marine fuel shortfall."

Nerurkar noted that the International Monetary Fund's April 2018 World Energy Outlook predicted global GDP growth of approximately 3.9% in 2019 and 3.8% in 2020, but the most recent outlook published in October lowered those outlooks to 3.0% and 3.4%, respectively.

ClearView anticipates a potential shortfall of 100,000 barrels per day in low-sulfur marine fuel in 2020, which at 0.3% of the global middle distillate market "suggests limited price impacts." But Nerurkar outlined several risks to that outlook. Higher-than-expected compliance among vessel owners could increase the low-sulfur marine fuel shortfall to 500,000 bbl/d. "By the same token, trade war[s], greater-than-expected supply and lower global economic growth could also potentially result in a distillate surplus next year," Nerurkar said.

In a Dec. 4 report, Goldman Sachs analysts argued that distillate inventories are meeting the shift to low-sulfur bunker fuel, which is already underway, but with diesel inventories near the low end of the historical five-year range, refining margins need to improve for the global refining industry to meet demand.

"We believe sustainable high compliance rates starting Jan 2020 would need diesel cracks to go up further to increase availability of compliant fuel," the analysts wrote. "Similarly, simple refining margins remain below cost support, and we expect run cuts at [the] lower part of the cost curve to drive higher diesel cracks as well."

But the analysts cited a decline in global GDP growth as a "key risk" to their forecast as it would allow diesel production to shift into the bunker fuel pool: "We note every 0.5% [shift] lower [in] global GDP could impact global oil demand by 0.5 [million bbl/d]."