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The biggest shift in oil market's history is 6 months away from us

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Tens of thousands of ships sailing the world's oceans burn more than 3 million barrels of sediment-like fuel with a high sulfur content every day. But from next year, the shipping industry will have to comply with rules that have to drastically reduce sulfur emissions.

"This is the biggest change in the history of the oil market," said Steve Sawyer, senior analyst at Facts Global Energy.

"This will affect crude oil producers, traders, shipowners, refiners, commodity market investors, insurance companies, logistics companies, banks ... Who is left? I'm trying to think of someone who may not be affected. That's why it's a huge transition, Sawyer said.

What is IMO 2020?

On January 1, 2020, the International Maritime Organization (IMO) will bring in new emission standards that will significantly reduce ship-source pollution.

Against the backdrop of widespread pressure on cleaner energy markets, the IMO will prohibit craft from using fuels with a sulfur content higher than 0.5% compared to levels above 3.5% at present.

"A brick wall is set at the end of December that is being built in the past two years, or you can rush it upside down and say" it hurts "or find a way around it.

The new regulations are a result of a UN Commission Subcommittee's recommendation of more than a decade ago and adopted in 2016 by the UN IMO, which sets out rules on safety, security and shipping pollution.

"If you consider shipping along with all countries that consume oil, it will be number four or five on the list - so that's a huge amount of consumption," said Anthony Gurnee, Chief Executive Officer of Ardmore Shipping.

Ardmore Shipping is a US registered company based in Ireland, which owns and manages a fleet of tankers carrying refined petroleum products.

"We are going to a fundamentally different kind of fuel. It has a greater impact on the refining industry than on shipping, "Gurnee said.

It is assumed that the forthcoming measures will create an oversupply of heavy fuel oil, while at the same time increasing the demand for IMO-compliant products - thus increasing the pressure on the refining industry to produce significantly more than the latter.

This is particularly important, energy analysts say, as oil producers in the Middle East - such as Saudi Arabia from OPEC - are likely to lose because they rely on crude oil with high sulfur content.

The shipping industry is under great pressure to reduce sulfur emissions, as the pollutant is a component of acid rain that damages vegetation and wildlife and contributes to the acidification of the oceans.

The proposed policy change comes at a time when bets are high for the world's ships. At the end of last year, UBS analysts estimated that the green cargo market could cost at least $ 250 billion over the next five years.


 Trader Aleksandar Kumanov

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