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By Trend

International regulations limiting sulfur in fuels for ocean-going vessels, set to take effect in January 2020, have implications for vessel operators, refiners, and global oil markets, Trend reports citing the US Energy Information Administration (EIA).

EIA believes that stakeholders will respond to these regulations in different ways, increasing uncertainty for crude oil and petroleum product price formation in both the short and long term.

The International Maritime Organization (IMO), the 171-member state United Nations agency that sets standards for shipping, is set to reduce the maximum amount of sulfur content (by percent weight) in marine fuels used on the open seas from 3.5 percent to 0.5 percent by 2020. These regulations are intended to reduce sulfur dioxide, nitrogen oxides, and other pollutants from global ship exhaust.

"The choice of compliance path for vessels introduces a risk to refiners: if scrubbers become widely adopted, higher-sulfur residual oils might still be used, potentially reducing the value of existing and new refining units capable of upgrading the residual oils," said a report released by EIA.

One approach refineries could pursue is to divert more low sulfur distillate fuel into the bunker fuel market, which would mean ocean-going ships would be competing with trucks, heavy equipment, trains, and planes for supplies of distillate fuels at a time when global demand for distillate is already high, according to the report.