Motilal Oswal - MOSL: OIL GAS â€“ IMO 2020: Busting the myth!-Diesel cracks may improve

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Motilal Oswal

Swarnendu Bhushan

MOSL: OIL & GAS â€“ IMO 2020: Busting the myth!-Diesel cracks may improve

Oil & Gas – IMO 2020: Busting the myth!; Diesel cracks may improve, but overall refining margins still may not

International Maritime Organization (IMO) has mandated a lower sulfur content of 0.5% in marine fuels, down from 3.5% currently, with effect from January 2020.
Various reports suggest that diesel offers the best alternative to high sulfur fuel oil (HSFO) and refineries may not be able to match this increased demand, resulting in spike in diesel cracks, and hence, refining margins.
Our research busts this myth. We believe there would be no significant impact on GRMs.

Replacement demand of 2.6mnbopd in 2020

Consumption of diesel as marine fuel is likely to rise from 0.75mnbopd in 2019 to 3.3mnbopd in 2020. This would result in additional demand of 2.6mnbopd of diesel, almost 6x the average annual incremental demand since 2000.
Even after knocking off ~1mnbopd of incremental production from new hydrocrackers, cokers and FCCUs globally, we would still need to fulfill 1.6mnbopd of demand. Add to this 0.8mnbopd of demand growth excluding marine.
This calls for 90.2% of global capacity utilization, ~4% higher than the maximum utilization witnessed since the data available in BP’s Statistical Reviews.

25/08/2018 20 EN

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Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Swarnendu Bhushan

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MOSL: OIL & GAS â€“ IMO 2020: Busting the myth!-Diesel cracks may improve

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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