International Maritime Organization 2020 Deadline Fast Approaching


Wednesday, September 25, 2019 / 11:10AM / By CSL Research/ Header Image Credit: Petroleum Economist

The refining industry is on the brink of a major shift as the International Maritime Organization (IMO) 2020 deadline is fast approaching. The new IMO regulations limits sulfur content of bunker fuel to 0.5% (down from 3.5%) and will take effect on January 1, 2020.

According to Logistics Management, a renowned global logistics information company, about 90% of global trade moves in the approximately 51,000 ships composing the world fleet. The fleet majorly run on High Sulphur Fuel Oil (HSFO) which, according to a Goldman-Sachs study, accounts for almost 90% of all sulfur emissions globally. These emissions have become a major environmental concern and prompted the adoption of the IMO 2020 regulation.

The implementation of the regulation will leave fleet with two options: convert to pricey low-sulphur oil or blend of high-sulphur and low-sulfur oils to meet the emission standards. This will create more demand for Low-Sulphur Fuel Oils (LSFO) like Nigeria's crude grades. The sulphur content in Nigeria's crude grades range from 0.1% to 0.2%, which makes them IMO 2020 compliant.

Since October 2016 when the new regulation was agreed upon, the premium on Nigeria's crude grades against the spot price of Brent- the global benchmark has been trending upwards. The rise in premium has been stronger in 2019 as the new rules draw closer. Year-to-date, bonny light has traded at an average premium of US$1.5/bbl compared to a US$0.9/bbl average premium at which it traded in 2018.

Proshare Nigeria Pvt. Ltd.

In our opinion, implementing the new IMO 2020 rules will give Nigeria an edge with the pricing of its crude grades in the global market. This will be particularly positive for the already strained government purse. However, consumers might need to bear the brunt of the higher shipping cost that will come with implementing the new regulation. Being an import dependent economy, an upward review in global shipping charges will feed into consumer prices and intensify domestic inflationary pressure, in the face of expectations of an upward revision in VAT and electricity tariffs.

Proshare Nigeria Pvt. Ltd.

Related News

1.       Where Has The Risk Premium Gone For Oil? - OIR 240919

2.      Fear Of An Iran War Sends Oil Prices Up - OIR 200919

3.      The Biggest Day For Oil In 50 Years - OIR 170919

4.      Average Prices Of PMS, AGO, HHK and Cooking Gas - August 2019

5.      Platts: Oil Could Test $80 After Attacks In Saudi Arabia

6.      Nigeria LNG Seeks $10B Funding To Expand Operations With A Seventh Train

7.      Oil Prices Set To Rise After Saudi Arabia Drone Attacks; Saudi Arabia Cuts Oil Output By 5m Barrels

8.     Oil Demand Destruction: A Trade War Reality

9.      Bullish Sentiment Creeps Back Into Oil Markets - OIR 130919

10.  Weakening Shale Productivity Very Bullish For Oil Prices

11.   Bolton Firing Threatens Bullish Sentiment - OIR 100919

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News