IMO 2020 effect disrupts fuel oil contract renewals
A traded market trying to price in uncertain IMO 2020 implications is wreaking havoc with term contract negotiations
Fuel oil is nine months away from a drastic fall in global demand due to tighter emissions standards in the shipping sector. As a result, annual fuel oil contracts worth billions of dollars that have largely peacefully rolled over for years are this year becoming the subject of frantic renegotiations, forcing even the most risk-averse companies to, in effect, take large bets on the future. The UN's International Maritime Organisation (IMO) is cracking down on the sulphur content of marine fuels. From 1 January 2020, the new ceiling is 0.5pc sulphur content, down from 3.5pc currently. This prevents much high sulphur fuel oil (HSFO), which averages over 2pc sulphur globally, from being used in
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