February 18, 2019 [Hellenic Shipping News] - Storage operator Vopak is reducing its exposure to the uncertainties of the high sulfur fuel oil market and is prepared to benefit from a lower sulfur cap in marine fuel in 2020, the company’s management said on a conference call.
“In hub locations we have experienced a challenging oil market, linked to last year’s backwardation, especially for fuel oil,” CEO Eelco Hoekstra said on the call to discuss the company’s 2018 results. “We are improving our infrastructure and reducing our exposure to HSFO. We are well placed to benefit from the opportunities that IMO provides in the storage sector,” he said.
The previous two years have seen price swings in oil markets, and backwardation in the fuel oil and crude markets has at times soured storage economics and led to more than one trading house not renewing their Rotterdam tank leases, managed by Vopak, according to sources.
HSFO is set to lose value as 2020 draws closer, following a ruling by the International Maritime Organization that sulfur content in marine fuel must not exceed 0.5%, down from the current limit of 3.5% on the high seas.
Bunker market participants expect a wider variety of marine fuels to be in use and for storage options to be more complex and varied than they are at present, as a result.
Vopak and shipping line Maersk announced in August that they will launch a 0.5% sulfur bunkering facility in Rotterdam. The initiative will cater for around 20% of Maersk’s global demand, Maersk said in a press release at the time.
Vopak is preparing for 2020: “Some [storage] capacity is down to prepare for the IMO conversion. We see in the early parts of 2019 that we are taking more tanks out of service for the retrofitting and they will come back again in the second half,” Hoekstra said.
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