IEA: Global Fuel Oil Demand Will Fall 4.6% By 2020
London (Reuters) - global demand for fuel oil will average 6.148 million barrels per day next year, down 4.6 percent from 6.44 million barrels per day in 2019, the international energy agency said in its December report released Thursday.
"By the fourth quarter of this year, fuel oil demand in the Netherlands appears to reflect the behaviour of fuel oil retailers, which emptied their high sulphur fuel oil stocks ahead of the IMO specification change," the IEA said. "After disposing of the high-sulfur fuel, fuel vendors began adding low-sulfur fuel to their storage tanks in September," the IEA said.
The new IMO rules, which reduce the sulphur limit for bunker fuel from January 1, come after Rotterdam's fuel oil suppliers reported very weak demand for the 3.5 per cent sulphur fuel and reduced supplies accordingly.
Meanwhile, liquidity in the high sulphur fuel oil barge market has declined. Although demand for high-sulphur fuel oil barges fell before the IMO imposed its sulphur cap, some market participants said they were concerned that continued demand for the product could outweigh the reduced supply in the coming months.
The forward curve for the 3.5 per cent fuel oil price suggests that the upward trend is likely to continue until 2020. Rotterdam barge's 3.5% fob fuel oil price for the january-february 20 period was set at $1.50 a tonne on Tuesday, up $3 from $1.50 a tonne the previous day. The shift from contango to backwardation suggests that market participants see value in the product early next year, in spite of an expected drop in demand as new sulphur regulations come into effect.
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