Diesel Prices Heading Higher by 2020?

By: Mike Dombroski / June 11, 2019

Analysts are getting increasingly worried that the refining industry will not be prepared in time to meet the lower sulfur regulation under the new International Maritime Organization (IMO) set to begin January 1, 2020 and will subsequently increase diesel prices in relation to crude oil.

barge passing refinery

The new IMO standard will require fuel to have no more than 0.5% sulfur by weight, down from 3.5%. This is called Very Low Sulfur Fuel Oil (VLSFO). Kurt Barrow from the HIS Markit said to Reuters that “you’re not going to build enough new refining equipment nor add enough scrubbers.” Barrow also believes “net cash margin per barrel may climb over $10 in 2020, from about $3.80 a barrel now.” Basically this would increase diesel prices by about 15 cents per gallon in relation to crude oil prices. Bank of America projected $25 a barrel diesel margin in the fourth quarter to comply with the IMO demand, but that may be difficult with the current economic growth concerns.

The overarching headwind that could disrupt this forecast is a continued trade war with China that would decrease economic growth and thus demand for oil. President Trump is set to meet Chinese President Xi Jinping at the G-20 meeting which is scheduled in Japan from June 28-29. Earlier today Trump said new tariffs would go into effect if Xi Jinping does not meet with him in Japan. Therefore, not only Wall Street, but all of us in the oil industry will be closely monitoring what transpires at the G-20 later this month as it greatly impacts us and our customers.

July NYMEX WTI crude oil currently trades higher by $0.05 to $53.31/barrel, RBOB is up by $0.013 to $1.7433/gallon, and ULSD is higher by $0.0046 to $1.8109/gallon.


Categories: oil refiners, China, Economic Impact, diesel, oil economy, refinery, oil storage


Mike Dombroski

Written by

Mike Dombroski


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


Comments

Subscribe to our blog

Price Feed

Stay up-to-date on current fuel prices and market trends with our NYMEX price feed (15 minute delay to the live market).

© 2018 Market data provided and hosted by Barchart Market Data Solutions. Fundamental company data provided by Morningstar and Zacks Investment Research. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer.

Categories

Contact Us