18SEP2019 - NEWS - Signs Of IMO 2020 In Physical Markets Are Tough To Find

If you’re concerned you’ve missed some early market movements getting ready for IMO 2020, don’t worry; not a lot has happened yet.

That doesn’t mean to say that the market has been completely bereft of any activity that could be seen as movements aligned with the shift to lower-sulfur marine fuels on Jan. 1. The general consensus in the market is that ships would start cleaning out their tanks of the old fuel this month and that would be when the market would start reflecting new demand for marine fuels with sulfur content of 0.5% maximum sulfur, or 50 parts per million, down from a maximum of 350 parts per million.

That doesn’t mean that nothing has happened. For example, a small group of crude oils that are both sweet (low sulfur) and heavy (which means that in a refinery they generally produce a high yield of fuel oil that can be used in ships) has seen their values rise relative to benchmark crudes like Brent. (It’s an unusual combination in the world of crude). Separately, an S&P Global Platts reported this week that in the Northwest European mark, a spread between 3.5% sulfur fuel oil and a 1% sulfur fuel oil widened to its highest level since the price reporting agency’s history on both those grades began in 2000. The 1% fuel oil would be noncompliant with IMO 2020, but it is seen as a proxy for it since the market for it is relatively active and liquid.