Availability of IMO-2020 compliant fuel is still uncertain, Marine Bunker Exchange warns

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We are well into the 3rd quarter of this year and a few months before the new low-sulfur regulation comes into force, however the bunker market is far from ready to accommodate such a switch in demand, the Marine Bunker Exchange (MABUX) explains in an article published by Bimco.

According to Sergey Ivanov, director of the Marine Bunker Exchange the reports coming from several oil majors are confusing as far as the availability of compliant fuel is concerned.

The 0.5% sulfur fuel is not physically traded right now and it is not yet clear when physical deliveries will start. For the time being, there are only futures traded with delivery in December 2019, Mr. Ivanov said.

According to information coming from major bunker suppliers, first regular deliveries of the new 0.5% sulfur fuel are expected to commence sometime during the 3rd quarter of this year. However, whether there will be enough availability of fuel oils in all major ports worldwide still remains uncertain.

Among the oil majors surveyed by MABUX, one said it is going to deliver LSFO in only 18 ports worldwide, including the major bunkering hubs, while it will continue to supply only 15 ports with HSFO. On the other hand, another oil major advised that, for the time being, it will only be delivering LSFO to 7 ports only.

“This picture suggests the question of availability of max. 0.5% sulfur fuel oil is critical at this point. No one is sure that there will be enough LSFO in all the main ports in the world,” Sergey Ivanov explained.

Pricing of the new fuel also remains unclear. This creates further uncertainty to Shipowners who can not properly budget their future expenses or inform their customers how much is the premium they will need to pay.

The lack of transparency over when the deliveries will start, where each grade will be available and how much the available quantities will be, makes forecasting almost impossible. Furthermore, price volatility is expected to remain. Right now, MGO is priced at a premium of around $250/ton over the HSFO but the premium is expected to reach close to $400/ ton at the first quarter of 2020, according to MABUX.

Shipowners need the new compliant fuel but they cannot get it right now while their concerns remain unanswered. Despite the fact that most of them are ready, the bunker market is not, Mr. Ivanov concluded.

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