IMO 2020 is the buzz behind the powerful refining uptrend. Public companies are performing and private equity is taking on major projects.
The conventional wisdom is that on Jan 1, 2020, over 3 million barrels of high sulfur fuel oil will need a new home as it can no longer be used on non-scrubber equipped vessels and that a significant portion of the substitution will come from gasoil heralding another golden age for refiners.
Like any well advertised regulatory change, market participants are well advised to take a step back and assess from a physical fundamental standpoint what is most likely going to happen.
Global products demand is strong, refinery runs are up but why have fuel oil inventories been dropping? Does the recent drop signal more bottoms destruction capacity than most give credit for?