In a recent online statement, KPI Ocean Connect CEO Søren Høll has warned risk that have been overshadowed by Covid-19 may come to the surface.
He noted: “This time last year VLSFO prices stood at highs not seen in many years. There were more than a couple of industry experts who believed that the IMO’s global sulphur cap might have enduringly created large HSFO-VLSFO spreads.
If that wasn’t enough, rumours about quality management, fuel incompatibility, and adequate availability – mainly concerning low sulphur blends – heightened the industry’s nerves during those first two months in 2020.”
So far, those fears have not been realised. As Høll observed: “There were concerns that some regions wouldn’t have the capacity to supply enough distillate fuels to meet both domestic and maritime demand when IMO 2020 was first introduced. However, there’s been plenty of compliant fuels, as many of the usual major consumers of distillates on land suffered huge demand drops due to Covid-19.”
“Nevertheless,” he continued, “it’s becoming increasingly important for the industry to prepare for some of the risks highlighted back in 2019, which may surface in the coming months. Although we believe the severest predictions from those early weeks in 2020 are unlikely to come to pass, there will be consequences if oil prices climb. Many financial institutions have already predicted this situation, and with the huge volatility in bunker prices last year, we’re already seeing prices gradually rise.”
There have been fewer quality issues than many analysts predicted but Høll cautions that this may have been partly masked by the pandemic and the depressed oil price. He warns: “These challenges may rear their head once the world starts to recover from Covid-19, distillate demand increases in other industries, and if unscrupulous suppliers start using cheaper components for blending.
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