High/Low Sulfur Differential to Narrow on Scrubber Demand

Differential narrowing. File image/Pixabay.

The price differential between high and very low sulfur fuel oil should settle at around $100 per metric tonne (pmt) by next year, an oil analyst has said.

Speaking to Ship & Bunker at the Argus Media oil forum in London, senior analyst at JBC Energy, Eugene Lindell, said that the current $200pmt differential may last a bit longer as the spread of the coronavirus interrupts scrubber installations but over the longer term, the market would head towards $100pmt.

“We see the differential averaging at around $200pmt on an annual basis in 2020.  By next year, we see the annual average at around $100pmt.”

The bunker market is looking for equilibrium and the wider differential between the high/very low fuel oil grades will probably stick over the coming months.  But the impact of an increase in the take up of scrubbers by ship operators will, ultimately, change the fundamentals.

“Although some of these installations may be delayed because of the coronavirus, our base case is that the demand from ships with scrubbers will narrow the differential,” Lindell said.

Installing emissions abatement equipment — more commonly known as scrubbers — allows ships to continue to use high sulfur fuel oil but remain in compliance with the IMO2020 sulfur cap.

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