As IMO 2020 lures newcomers to bunker sector, profit is far from guaranteed: Fuel for Thought

A pharmaceutical company’s ill-fated attempt to focus on trading bunker fuel derivatives highlights the unpredictability that IMO 2020 has injected into oil markets. Having sold off its opioids business the previous year, in early 2018, Norway’s Vistin Pharma announced it would set up a new oil trading unit focusing on profiting from the International Maritime Organization’s lower sulfur limits for shipping in 2020. Ten months and $9.8 million of paper losses later, the company said in early January that it would be closing the unit. Vistin had bet on the spread between gasoil and high sulfur fuel oil in Singapore widening in the run-up to 2020, when fuel oil demand is set to plummet as the IMO prompts shipowners to shift to cleaner-burning fuels. In a presentation from September 2018 on the company’s website, it projected the spread widening to as much as $800/mt by the end of 2020. But the strategy appears to have been foiled by a combination of last year’s strength in fuel oil prices and the rapid drop in crude prices in the fourth quarter. By December 31, the 150,000 mt of contracts the company held represented a mark-to-market loss of NOK 85 million ($9.8 million).… continue reading

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Source: CTRM Center

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