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IMO 2020 emission measures to boost crude prices–analysts warn

IMO 2020 emission measures to boost crude prices–analysts warn

Mubasher: At the time of a widespread movement towards cleaner energy markets, International Maritime Organization (IMO) said it would enforce new emission control standards on 1 January 2020, with the aim of significantly curbing pollution produced by ships.

The forthcoming measures are seen as a source of great worry for some of the world’s major oil producers, owing to the ill-prepared conditions of global energy and shipping businesses.

This will mark the biggest shift in the history of the market, Energy Aspects chief oil analyst Amrita Sen told CNBC's Squawk Box Europe this week.

While IMO targets to cut emissions of sulfur, the new rules are widely expected to create a market oversupply of high-sulfur fuel oil, with a high demand for IMO-compliant fuel.

"Middle Eastern producers [would] lose out heavily from that because their crude tends to be very high sulfur," Sen said.

On the other hand, the US is set to cope with the IMO’s new standards, given that its refineries are known for lighter crude output.

Meanwhile, Brent crudes are expected to climb to $90 per barrel (pb) by 2020, as the new international shipping rules improve the quality of fuels produced by the refineries, Morgan Stanely analysts stated in a research note last week,

Oil market would remain cast into supply shortage, while inventories would continue to draw, the bank said, adding that “this will likely underpin prices.”

The newly introduced standards will ban ships using fuel with sulfur content higher than 0.5%, which is a major component of acid rain, unless they use equipment to reduce sulfur emissions.

It is worth noting that few ships have invested in equipment to clean up pollutants that burn high-sulfur fuel, and the majority of shipping companies are believed to invest in the capacity of producing low-sulfur fuel.