Forget Iran and OPEC — there’s another issue that will keep oil prices supported for the next two years, according to Morgan Stanley.
Brent crude will reach $90 a barrel by 2020 as new international shipping regulations take effect, overhauling the types of fuels produced by refiners, the bank’s analysts said in a report.
The changes, which force vessels to consume lower sulfur fuels beginning in January of that year, will lead to a boom in demand for middle distillate products including diesel and marine gasoil, triggering the need for more crude, they said.“We foresee a scramble for middle distillates that will drive crack spreads higher and drag oil prices with it,” wrote Morgan Stanley analysts including Martijn Rats.
While crude has already received a boost due to supply cuts by the Organization of Petroleum Exporting Countries and geopolitical events including the U.S. decision to reimpose sanctions on Iran, the rule changes add to the impact. Global benchmark Brent, which neared $80 a barrel earlier this week, is trading at the highest levels since late 2014. Futures for the January 2020 contract are at about $66.60 a barrel.
The rules from the International Maritime Organization call for ships to reduce the maximum sulfur content of their fuels to 0.5 percent, from 3.5 percent in most regions currently, in an effort to curb air pollution that has been linked to respiratory diseases and acid rain. The changes are expected to create an oversupply of high-sulfur fuel oil while sparking demand for IMO-compliant products, putting pressure on the refining industry to produce more of the latter fuels.
Repsol SA, Reliance Industries Ltd., Valero Energy Corp. and Tupras Turkiye Petrol Rafinerileri AS are among those who stand to benefit most, according to Morgan Stanley.
“The refining systems of these companies are highly geared towards middle distillates” and minimal high-sulfur fuel oil output, which is “the most advantageous combination after 2019,” the bank said in a related report.
Also see: Rich Rewards Await Oil Refiners as Ships Made to Switch Fuel
Middle distillate markets are already showing signs of tightness. Diesel and gasoil stockpiles in key storage hubs in Europe, the U.S. and Asia are below their five-year seasonal averages. At the same time, middle distillate demand has grown at an annual rate of about 600,000 barrels a day since 2011, accelerating to 800,000 barrels a day in recent quarters, Morgan Stanley estimates.
Increased Demand
With the IMO ship-fuel regulations expected to boost demand by an additional 1.5 million barrels a day by 2020, traders will seek to get the right product supplies, which should boost crude prices, according to the bank. While global crude production will rise, it probably won’t increase by the 5.7 million barrels a day needed by 2020 to meet the additional demand for fuels, the analysts said.
“The last period of severe middle distillate tightness occurred in late-2007/early-2008 and arguably was the critical factor that drove up Brent prices in that period,” Rats wrote, referring to the period when crude oil approached levels close to $150 a barrel.
U.S. oil output, now at a record, likely won’t come to the rescue, since the crude pumped in America’s shale regions is light and not ideal for producing middle distillates, Morgan Stanley noted.
“We expect the crude oil market to remain under-supplied and inventories to continue to draw,” the bank said. “This will likely underpin prices.”
MASTERMIND on Wed, 16th May 2018 5:40 pm
Seems like the supply crunch predicted in the 2017 HSBC Peak Oil Report is coming to pass. Effective spare capacity shrinking to an ever more miniscule fraction of an ever-growing total demand, which the influx of tight oil cannot hope to match sustainably, let alone profitably, while new discoveries are both rarer and smaller in size. A slower increase of demand, alone, would not remedy this issue.
“Even in a world of slower oil demand growth, we think the oil industry’s biggest long-term challenge is to offset declines in production from mature fields. The scale of this issue is such that in our view rather there could well be a *global supply squeeze some time before we are realistically looking at global demand peaking.”
And there is no more kicking the can down the road.
“The size of oil discoveries has also been steadily diminishing over the years, fully consistent with our earlier findings on field start-ups. Oil fields typically start up within 5-15 years of discovery, so trends related to discoveries should simply anticipate those for producing fields with a time lag. According Wood Mackenzie, the average size of oil discoveries has steadily declined over time and reached an all-time low in 2015 of just 24mmbbls of oil resources per discovery well. For context, this compares to 340mbbls in the 1960’s and 180mbbls in the 1970’s, and is equivalent to 18% of the historical annual average since 1960.”
https://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017
https://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017
Roger on Wed, 16th May 2018 6:21 pm
Someone needs to turn Venezuela back on…soon.
Go Speed Racer on Wed, 16th May 2018 6:42 pm
MORE STUPID CRAP, make the ships burn
super clean fuel ???
THE BIG BAD ALL KNOWING HILLARY MOMMY
KNOWS WHATS BEST FOR YOU
AND YOUR 800 FOOT SHIP.
Somebody stuff a propellor up her ass.
That’s why we got TRUMP. He will
throw out the regulations any day now.
AND pull the plug on the NASA satellite
so there’s no CO2 numbers anymore.
You can run a big ship on old tires and
sofa cushions, it it has steam boilers
like the Titanic.
That will give big bad Hillary something
to cough about.
Sissyfuss on Thu, 17th May 2018 1:51 pm
Expect any day that analyst Martijn Rats will desert the sinking ship of Captain Morgan Stanley.
Cloggie on Thu, 17th May 2018 3:03 pm
Folks with names like “Martijn Rats” are genetically disposed to recognise a sinking ship.
MASTERMIND on Thu, 17th May 2018 3:21 pm
Almost half of US families can’t afford basics like rent and food
http://money.cnn.com/2018/05/17/news/economy/us-middle-class-basics-study/index.html
Go Speed Racer on Thu, 17th May 2018 9:20 pm
Well Mr Mastered Mind,
Thx for the link, reading carefully.
IMHO they can’t afford food and rent cause they
won’t do any work, and their panhandling money
is all spent on pot and booze.
Then they start flinging poop at restaurant cashiers,
check it out.
Like Trump said, they just a bunch of animals.
They don’t have their 8000 sq ft house cause they
too lazy to work.
However I do care about the phoneless. It’s not right
that some people have a phone, sometimes several
but others go to bed phoneless each night.
The government should provide free phones to all,
to help the phoneless.
Go Speed Racer on Thu, 17th May 2018 9:43 pm
Here’s the link for the poop flinger.
I bet she can’t afford food and rent, LOL.
http://www.news10.com/news/national/woman-throws-poop-at-coffee-shop-employee-who-denied-her-restroom-access/1185350236
Imagine the damage. That’s a major teardown for the restaurant, to sanitize and meet health ordinances.
What to do with the homeless?
Get some branch chippers, big ones with
the big engine.
Push the homeless thru the branch chipper.
If they come out the other end walking and talking
and I damaged, they get a free tent from the government….
But if they don’t come out health my and happy, oh too bad, then no free tent
Here is the most extraordinary essay on class stratification in USA. Best such article ever.
https://www.google.com/amp/s/boingboing.net/2018/05/17/gatsby-2018.html/amp
But it is a bit long-winded.
Go Speed Racer on Thu, 17th May 2018 9:53 pm
Wait wait
Here is the link.
Very long article, very good.
https://www.theatlantic.com/video/index/560222/america-class-problem/
The article explains that poor people
are deadbeat drug addicted losers
who get what they deserve.
Cloggie on Thu, 17th May 2018 10:30 pm
“THE BIG BAD ALL KNOWING HILLARY MOMMY”
https://goo.gl/images/aV1aeK
“The power of makeup”
Cloggie on Thu, 17th May 2018 10:52 pm
US 1% has 42% wealth
https://www.theatlantic.com/business/archive/2016/03/brookings-1-percent/473478/
Global 1% has 82% wealth
https://www.cnbc.com/2018/01/22/wef-18-oxfam-says-worlds-richest-1-percent-get-82-percent-of-the-wealth.html
German 1% has 33% wealth
http://www.spiegel.de/international/business/inquality-and-wealth-distribution-in-germany-a-1190050.html
In Holland (“the only country in the world where communism works”.lol) it is 28%
https://www.volkskrant.nl/economie/rijkste-1-procent-bezit-bijna-28-procent-van-het-totaal-vermogen-in-nederland~b07d4822/
For “average whitey” the best place to be is Europe:
https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult
Median wealth per capita in France and Italy is 2.5 times as high as in the US.
minimum wage:
(converted in euro)
France……9.76
Holland…..9.52
Belgium…..9.28
Germany…..8.84
UK……….8.79
Canada……7.64
USA………6.84
China…….1.78
Russia……0.62
Consequently the potential for “communist revolutions”, the ones that millimind wants to organise, is higher in the US than in Europe.
Boat on Thu, 17th May 2018 11:09 pm
Clog
Always looking out for the lazy uneducated minimum wage workers. Load-em-up and takem home.
MASTERMIND on Thu, 17th May 2018 11:12 pm
Clogg
The revolution is coming! Once the oil starts to run out the public will lose all faith they had in the system..Even though there isn’t much left these days to be lost..but no society can survive without trust in their institutions. And once that trust has been broken..Its game on for the elites! They can run but they can’t hide..
MASTERMIND on Thu, 17th May 2018 11:20 pm
Clog
Bitcoin to consume 1.8% of world’s electricity by late 2019 – equivalent to the world’s entire solar power output
https://grist.org/article/bitcoins-energy-use-got-studied-and-you-libertarian-nerds-look-even-worse-than-usual/
Thanks solar power..What a fucking joke..And a total waste..Clogg you are a god damn moron..
Boat on Thu, 17th May 2018 11:21 pm
Mm
Lol @ a revolution. BTW, when have institutions been trusted. Did you forget the 60’s? Try a Google.
Boat on Thu, 17th May 2018 11:27 pm
Mm
Bitcoin will crash, just another scheme for idiots.
Cloggie on Thu, 17th May 2018 11:56 pm
Always looking out for the lazy uneducated minimum wage workers. Load-em-up and takem home.
You will be on the receiving end of the social unrest (aka as CW2) in the US after the downfall of Trump, the last president of European America.
These tent city darkies will come after your ass, boat. And the koshers (whose power position you simply do not grasp, you are pretty uneducated yourself), will be their leaders. They have decided that your white ass has to go.
https://www.youtube.com/watch?v=q90kmUbEv7c
https://documents1940.wordpress.com/2017/09/27/paul-krugman-white-americans-are-losing-their-country/
But by all means, keep on shouting “raysist”. Perhaps you can start an a capella virtue signalling choir with Meathead and sings songs, with lyrics solely based on “raysist” and “natzi”.
Only when boat will be in a shabby retirement home in Greater Baltimore, after CW2, he will remember the discussions at peakoil.com and in an attempt to make sense of it all, he will finally read Kevin MacDonald’s “Culture of Critique”:
https://www.unz.com/book/kevin_macdonald__the-culture-of-critique/
Too late.
MASTERMIND on Thu, 17th May 2018 11:58 pm
Boat
when the oil starts to run out. Americans will go totally bonkers. All their dreams and hopes for the future will be torn to shreds. And just think about their kids lives too. There will be hell to pay. And it won’t be pretty. people will simply have nothing to lose..and people who have nothing to lose are very dangerous. I’m sure the government will try to put their big boot down. But I doubt that will work and likely will just make things more chaotic and worse.
Go Speed Racer on Fri, 18th May 2018 2:26 am
Hi Clogster,
Thanks for the ‘makeup’ pic.
Ya know some people think Hillary is old
and ugly, but I don’t think that’s true…
https://theuglytruth.wordpress.com/2016/10/28/2006-audio-emerges-of-hillary-clinton-proposing-rigging-palestine-election/
The real problem is, you have that ugly
old bitch Merkel, who is filling up your
country with terrorists. I guess that’s
not a problem, if you don’t mind
being run over by a rented truck.
A bit more of the Clinton philosophy:
https://me.me/i/2975728
AND
https://me.me/i/what-is-hillary-s-mera-favorite-pizza-little-seizures-13399882
Davy on Fri, 18th May 2018 5:05 am
‘For “average whitey” the best place to be is Europe:”
I have lived in both places. Home is where home is not something that is based on stupid abstract number comparisons. I would rather be in a less populated area than a more populated area. You can have Holland and your stupid Tulips.
Davy on Fri, 18th May 2018 5:08 am
“Consequently the potential for “communist revolutions”, the ones that millimind wants to organise, is higher in the US than in Europe.”
Stupid nonsense. Most Americans are not into being communist. We tend to be individualistic hence market based capitalism and bad behavior that runs amok in the US compared to other areas.
Davy on Fri, 18th May 2018 5:10 am
“Only when boat will be in a shabby retirement home in Greater Baltimore”
Boat lives in Houston stupid.
MASTERMIND on Fri, 18th May 2018 5:26 am
Alabama Congressman Blames Sea Level Rise On Rocks Falling Into The Ocean
https://www.al.com/news/huntsville/index.ssf/2018/05/alabama_rep_mo_brooks_hit_for.html
Antius on Fri, 18th May 2018 6:34 am
The myth of an imminent energy transition.
https://oilprice.com/Energy/Energy-General/The-Myth-Of-An-Imminent-Energy-Transition.html
Oil and gas provide 58% of the world’s primary energy. Coal provides 28%. Everything else combined is only 14%. Investment in renewable energy has been slowly declining for 11 years. Nuclear power is growing fast in Asia but is dead in the water everywhere else.
Hopes of an energy transition away from fossil fuels look sure to be dashed.
MASTERMIND on Fri, 18th May 2018 6:56 am
Antius
Don’t worry clogg will just post some links to his stupid blog that he doesn’t allow any comments on. That he will claim that renewable s are well on their way. and they can even create oil..lol
Cloggie on Fri, 18th May 2018 1:42 pm
“The myth of an imminent energy transition.”
Contradictio in terminis. “immanent” and “transition” exclude each other. The energy transition will last decades.
From the link:
“It’s true that wind and solar are being deployed quickly, at an exponential ratein fact. But impressive as it all is, renewable energy installations are far too slow to catch the still-hardy appetite for fossil fuel consumption. Such energy obesity is not virtuous”
How did prof. Allen Bartlett put it again?
“The greatest shortcoming of the human race is our inability to understand the exponential function.”
Antius on Fri, 18th May 2018 2:04 pm
“The greatest shortcoming of the human race is our inability to understand the exponential function.”
It isn’t looking hopeful for maintaining rapid growth in renewable energy. Funding is flat since 2011, actually declining slightly. This suggests a linear increase in capacity.
file:///storage/emulated/0/Download/1526592067-20180515_figure_2_-_global_investment_in_renewable_energy_supply%20(1).jpg
MASTERMIND on Fri, 18th May 2018 3:05 pm
Clogg
Next year bitcoin mining will use up all of the worlds solar power production on its own.. You were duped by big tech! LOL
MASTERMIND on Fri, 18th May 2018 3:13 pm
MIT says it will take 400 years to get green energy generation to replace fossil fuel energy generation
https://www.technologyreview.com/s/610457/at-this-rate-its-going-to-take-nearly-400-years-to-transform-the-energy-system/
Cloggie on Fri, 18th May 2018 3:26 pm
“MIT says it will take 400 years to get green energy generation to replace fossil fuel energy generation”
That is not what MIT says, you deceiver.
MIT says 4 centuries AT THIS RATE.
It CAN be done in a decade:
https://deepresource.wordpress.com/2017/09/30/hans-josef-fell-accelerating-the-global-transition-to-100-renewable-energy/
MASTERMIND on Fri, 18th May 2018 3:32 pm
Clog
You are putting the cart in front of the horse again..And shouting in all capital letters just proves you are an unsophisticated moron.
Peak oil is now..Shortages are soon. Per IEA
https://imgur.com/a/pYxKa
The early peak oilers weren’t wrong, they were just ahead of their time. All great visionaries usually are..
Cloggie on Fri, 18th May 2018 3:39 pm
What has your co-tribalist Sagan to do with peak oil??!!
So what, oil will be at $150.
That’s wonderful news!
For Putin his tressury and for the European renewable energy industry. For American SUV owners not so much.
MASTERMIND on Fri, 18th May 2018 3:44 pm
Clog
How is oil at 150 great for renewable energy? Renewable energy is used for electricity. Oil is not used for electricity. Its used for transportation…You are as dumb as they come..
MASTERMIND on Fri, 18th May 2018 4:07 pm
Sante Fe high school shooting in Texas is at least the 20th of 2018
http://www.usatoday.com/story/news/nation-now/2018/05/18/school-shootings-list-2018/623297002/
See! The sky is falling!
onlooker on Fri, 18th May 2018 4:23 pm
Funny, oil at $150, would crush the world economy. How are you going to mass produce a Renewable infrastructure when the Economy is in ruins?
MASTERMIND on Fri, 18th May 2018 5:49 pm
Onlooker
Don’t worry the nano bots will take over when the world economy is in ruins!
Boat on Fri, 18th May 2018 6:03 pm
Onlooker
Just like the cycle we went through. Demand would drop some short term and drillers would be going gang Busters. Oil sands would get funding once again. Fracking would have the money to go global.
At those prices even environmentalists will want drill baby drill.