Rising prices show tighter supplies of cleaner fuel for global shipping

A worker walks past a ship at the Red Sea port of Hodeidah in Yemen. (Reuters)
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Updated 11 January 2020

Rising prices show tighter supplies of cleaner fuel for global shipping

NEW YORK: The price of very low-sulfur fuel oil has risen in recent months, a sign of increasing worry there is not enough of the fuel to comply with new global shipping laws that took effect this year, market participants said.
Very low-sulfur fuel oil (VLSFO) lately has started to trade at levels comparable to marine gasoil, a type of diesel fuel used by tankers. That is an indication that refineries may need to increase production of VLSFO as tankers shift from dirtier, high-sulfur fuel to a cleaner product to comply with International Maritime Organization regulations designed to reduce smog.
Under those rules, shippers either need to use fuels with a sulfur content not exceeding 0.5 percent, or install scrubbers that can clean higher-sulfur fuels to reduce emissions. The rules, known as IMO 2020, affect more than 50,000 merchant ships worldwide.
Supply has tightened in trading markets in Asia and Europe and now in the US. On Wednesday VLSFO in Houston traded at $642 per ton, compared with $667 per ton for marine gasoil, S&P Global Platts data showed. That $25 spread was at $152 half a year ago. That suggests not enough VLSFO is being produced and raises concerns about supply this coming spring when refiners go into maintenance season, said Rick Joswick, head of oil pricing and trade flow analytics at S&P Global Platts in New York.
The spread in Singapore has narrowed to $15, while in Rotterdam it has narrowed to $3, S&P Global Platts data showed.
Meanwhile, VLSFO stocks are also falling, Joswick said.
“You can’t cover demand out of inventory forever,” he said. “Production has to pick up and trade flows have to shift.”
“It means marine gasoil needs to be called upon to cover some of that demand,” Joswick added.
The spread between VLSFO and high-sulfur fuel used by shippers that installed scrubbers was $330 per ton in Singapore and $272 per ton in Houston, S&P Global Platts data showed. That spread was greater than shipowners expected, benefiting tanker operators that installed scrubbers, shipping sources said.
VLSFO demand could prompt refiners to increase supplies later this year, said Andy Lipow, president of Lipow Oil Associates in Houston. “This is a nice, high price for VLSFO. We’ll reach some new equilibrium,” he said.

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Scrubbers

Scrubbers are used to clean higher-sulfur fuels on ships to reduce emissions.


IMF experts visit Lebanon amid worsening economic crisis

Updated 20 February 2020

IMF experts visit Lebanon amid worsening economic crisis

  • IMF team will provide broad technical advice
  • Lebanon has not requested IMF financial assistance

BEIRUT: A team of IMF experts met Prime Minister Hassan Diab on Thursday at the start of a visit to provide Lebanon with advice on tackling a deepening financial and economic crisis, an official Lebanese source said.

The IMF has said the team will visit until Feb. 23 and provide broad technical advice. Lebanon has not requested financial assistance from the Fund.

The long-brewing economic crisis spiraled last year as capital flows into the country slowed and protests erupted against the ruling elite over decades of corruption and bad governance.

Diab’s government, which took office last month, must decide what to do about upcoming debt payments, notably a $1.2 billion dollar-denominated sovereign bond due on March 9.

Lebanese President Michel Aoun meanwhile said on Thursday measures would be taken to hold to account all those who contributed to Lebanon’s financial crisis through illegal actions be they transfers abroad, manipulation of Eurobonds or other acts.

“There is information that we are still in need of with regards to the banking situation. There are measures that we will take to hold to account all who participated in bringing the crisis to where it is,” Aoun said, according to his Twitter account.

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One of Lebanon’s most influential politicians, Parliament Speaker Nabih Berri, said on Wednesday that debt restructuring was the best solution for looming maturities.

Lebanon will on Friday review proposals from firms bidding to give it financial and legal advice on its options, a source familiar with the matter said on Thursday. The government aims to take a quick decision on who to appoint, the source said.

So far, firms bidding to be Lebanon’s legal adviser are Dechert, Cleary Gottlieb, and White and Case, the source said.

Lebanon has issued requests for proposals to seven firms to provide it with financial advice.

The government on Wednesday formed a committee tasked with preparing an economic recovery plan that includes ministers, government officials, a central bank representative and economists, according to a copy of a decree seen by Reuters.