The impending International Maritime Organisation Marpol Annex VI regulation on limiting sulphur content of bunker fuel to a maximum of 0.5%, beginning January 1st, 2020, will herald a change for the oil and associated industries the likes of which most participants have never experienced.
The impact of this regulatory challenge cannot be underestimated as it seeps into virtually every sphere of the global industrial ecosystem driven in no small part by 90% of the world’s goods still travelling by sea. Beyond the seaborne market, the knock-on effects may well impact other sectors that are also procuring transportation and associated fuels as the maritime sector migrates, in part, away from 3.5% bunker fuel to a mixture of Marine Gasoil (MGO) and the new Ultra Low Sulphur Fuel Oil 0.5% (ULSFO).
So, who else could be impacted?
The potential pull on higher value molecules in the refining system has already been creating significant volatility in forward markets of both fuel oil and diesel – and volatility from a forward earnings perspective for corporates is something that is rarely welcomed.
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