New Sulfur Regulation and BP Merger Could Have Transformative Effect
A convergence of events transpiring now will likely majorly impact the fuel industry. Reportedly, BP Singapore is merging two Asian fuel trading teams just as oil is bracing for new sulfur regulation.
The International Maritime Organization plans to tighten rules worldwide on the sulfur regulation in ship fuel IMO 2020. This move is already shrinking supply in the top Asian trading hub. The combined impact of these events likely will merge fuel trading and cause a paradigm shift in the industry.
Impact of Sulfur Regulation
Oil majors are bracing for the rule change, which will reverberate across the worldwide oil market. Demand for lower sulfur fuel due to changes to the sulfur standard and sulfur regulation could raise consumption of diesel. This will cause traders, shippers and refiners to consider investing instead in cleaner fuels. Some will opt to install technology to reduce emissions in bottom-barrel products.
Experts believe this will completely change the oil trading space. Relentless technological innovation as well as IMO 2020 will dramatically alter the entire landscape.
What This Means for Crude Oil Storage
In the past, crude oil storage has been contracted primarily on a long-term basis. Only large and well-capitalized companies able to accept large deliveries were eligible. The Matrix model at LOOP has changed all that. Storage operators can now leverage optionality in current contracts and new participants can access short- and intermediate-term storage contracts.
In this way, the Matrix model optimizes storage and utilization assets in a flexible, scalable manner. This model can expand geographically, allowing storage operators to create a liquid hub right at their location.
We believe this methodology is the future of midstream. Through an auction mechanism, one month of storage becomes like a calendar spread option. The IMO 2020 train will require the midstream sector to change and adapt rapidly.
At Matrix Global, we are transforming how global energy companies transact storage with our energy industry trading and financial derivatives products. Our services can assist companies in navigating current trends such as what is transpiring in the Asian markets.
We have extensive experience in logistics, commodity financing, and trading, and we’re committed to improving how the industry transacts.
Contact us today for more information.