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Exxon Expects Demand For High-Sulfur Fuel Oil To Drop 25%   

Global demand for high-sulfur fuel oil is expected to drop by 25 percent through 2025 because of the stricter emissions regulations for ship fuel beginning in 2020, Reuters quoted Bryan Milton, President of ExxonMobil Fuels and Lubricants, as saying at the Scotia Howard Weil 47th Annual Energy Conference in New Orleans on Monday.

The new sulfur content regulations by the International Maritime Organization (IMO) as of January 1, 2020, limit the sulfur content in fuels for ships to 0.5 percent, slashed from the current 3.5-percent limit.

The downstream sector globally is on the cusp of “one of the biggest shakeups ever,” the IEA said in its Oil 2019 annual report earlier this month, referring to the IMO rules as of next year.

The IEA estimates in the annual report that demand for high sulfur fuel oil (HSFO), the main vessel fuel since the 1960s, will plunge to 1.4 million bpd from 3.5 million bpd in just one year, and that there will be 4,000 scrubbers installed on large vessels by the end of 2020, consuming 700,000 bpd of fuel oil.

At the same time, many shipping companies will prefer to use marine gasoil (MGO) instead of a new very low sulfur fuel oil (VLSFO), despite its higher price, the IEA notes, estimating that demand for MGO will jump from 890,000 bpd in 2019 to 1.98 million bpd in 2020.

The drop in fuel oil demand and the rise of petrochemicals over the next few years will benefit the U.S. oil producers whose typical crude products are lighter, the IEA said.

Meanwhile, oil refiners around the world from Europe to the United States to Asia are preparing to capture high refinery margins for distillates like diesel and marine gasoil—as high as they can get.

To this end, some refiners have changed their maintenance schedules for 2019, with planned refinery stoppages heavily geared toward the spring in the first half of the year, leaving more operating refining capacity for the fall of 2019, when the 2020 ship fuel change will be imminent.

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By Tsvetana Paraskova for Oilprice.com

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