Market Overview Refined oil products to see stronger demand as vaccine rollout gains momentum Marketview Fujairah Special Features Shipping's "dirty fuel" stages a comeback as emissions targets loom
S&P Global Platts & Fujairah The evolution of price assessments
Media Promoting Fujairah storage data
David Martinez
Senior Director, Commodity Solutions Crude and Refined
S&P Global Platts
We have not seen an inflexion point in the market like the one we are living in since early 2009. Energy markets and the industry as a whole are on their toes, as several factors could easily thwart the return of both supply and demand for products after the disruptions from the pandemic
Oil demand: Coming in hot
Demand for crude oil and refined products is recovering quickly, even if somewhat unevenly. The recovery rate is expected to continue during the summer of 2021, driven by resilience in the US, China and the Middle East. But there are risks on the crude supply side, both from the OPEC group of producing countries and beyond. Fundamentals are expected to tighten, and while we are still far from the psychologically important $100/bbl level, upside risk is building up and this number is being discussed a lot more.
At the same time, rising inflation is no longer just lurking, and it has come out of the shadows. A few data points have been confirming the concerns of some central bankers. Whether high inflation is a self-fulfilling prophecy or driven by fundamentals, it doesn’t matter. The fact is that countermeasures by central bankers could stop the music or at least slow the tempo
But then there is the “supercycle”. Recent rallies in most commodity markets have fuelled talks of another long period of sustained high prices. It could be that we are just experiencing a confluence of factors, “a perfect storm” that by definition is temporary. In any case, the question keeping commodity traders and analysts awake at night remains largely the same. Will demand recovery be sustainable in the face of rising inflation? Or will tightness in the market prevail?
HSFO? Yes, I remember you
The industry is grappling with all the same questions at more micro-levels too. Energy Transition is no longer a buzzword. It is taking shape and becoming a reality, from countless new businesses being developed (including at Platts) to the passions of activist investors that it is igniting.
We have seen IMO 2020, a legislation that could be put in the ET bucket, affecting marine fuels’ supply and demand balances. Figures from S&P Global Platts Analytics indicate that demand during 2020 was about a third of what it has been during 2019, a sharp decline as expected. But it has not disappeared, and it has gained slightly from the bottom of February 2020. In this edition of the Fujairah magazine, we talk about how the dirtiest of bunker fuels might be finding a niche in larger vessels for which installing scrubbers is economical. And as more vessels are retrofitted, demand for HSFO might not only be sustained but propped up.
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