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15 Sep 2019:Mixed outlook for refiners as a result of IMO 2020

Analysists expect that the implementation of the IMO 2020 sulfur regulations will lead to significant changes in trade flows as refiners worldwide adjust both their crude intake as well as their product output. For sophisticated (“complex”) refineries with significant upgrade capacity, it will be relatively easy to reduce the output of less desirable products like fuel oil and convert it into more valuable products. However, “simple” refineries without coking or hydrocracking capacity don’t have this flexibility. These refineries will need to reduce their output of high sulfur fuel oil by switching to lighter and sweeter crude and feedstocks. The combined global implications of all the changes that these individual refineries will be making are very hard to forecast since there are many factors to consider and the oil markets are very dynamic and constantly changing. However, we still like to illustrate the potential impact of these changes on trade flows and the tanker market by analyzing two refiners at the opposite end of the spectrum. We will compare a complex refinery typical for the U.S. Gulf with a simple refinery that is common in countries in the Mediterranean, like Italy.

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