2020 sulphur cap see sweet crude premiums rising

Malcolm Latarche

Malcolm Latarche · 13 January 2020

ShipInsight


Some sweet crude oils are attracting high premiums with prices nudging $100 per barrel according to a report by Bloomberg.

According to the report, Australia’s Santos last week sold a cargo of March-loading Pyrenees, a dense and low-sulphur oil, at a premium of about $31 a barrel over Dated Brent, according to traders who took part in the tender. That’s the equivalent to just under $100 a barrel given that the global benchmark is trading at about $65.

Oil prce

Bloomberg cites the effects of the IMO 2020 sulphur cap as being the driver behind premiums for sweet crudes saying “Demand for so-called heavy-sweet oil like Pyrenees has surged in recent months due to cleaner global ship-fuel standards, known as IMO 2020. The new rules have boosted the value of these crudes that are low in sulphur and also viscous, which makes them better for marine engines. Low-sulphur marine fuel, another IMO compliant type of oil, cost about $640 a tonne this week in Singapore, the equivalent of about $95 a barrel.

Santos had sought a target price of $32 a barrel or more over Dated Brent, according to traders. The company has a minority stake in the Pyrenees project, which it acquired through its 2018 purchase of Quadrant Energy. “New IMO 2020 environmental regulations for shipping bunker fuel are driving the low-sulfur fuel oil market,” a Santos spokeswoman said in an emailed statement. “Heavy sweet crudes like those from our Van Gogh and Pyrenees fields are well suited for fuel oil blending to meet the new environmental requirements and are currently in very high demand.”

Pyrenees is also particularly valued because of its relative scarcity, with production of about 15,000 barrels a day pumped from fields off Western Australia, according to BHP Group, the majority owner and operator. A cargo to load this month was sold in November at more than $17 a barrel over Dated Brent. Another Australian heavy-sweet crude, Van Gogh, sold at a premium of as high as $19 to Dated Brent in December.

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