Shipping’s sulphur cap will spur crude prices to reach $90 a barrel: Morgan Stanley

Brent crude will reach $90 a barrel by 2020 thanks to the IMO’s impending sulphur cap on shipping, a new report from Morgan Stanley maintains.

The 0.5% sulphur cap will usher in a boom in demand for middle distillate products including diesel and marine gasoil, triggering the need for more crude, Morgan Stanley analysts maintained in a report issued on Wednesday.

“We foresee a scramble for middle distillates that will drive crack spreads higher and drag oil prices with it,” wrote Morgan Stanley analysts.

Futures for the January 2020 Brent contracts are currently standing at about $66.60 a barrel.

“The last period of severe middle distillate tightness occurred in late-2007/early-2008 and arguably was the critical factor that drove up Brent prices in that period,” the report noted, referring to the period when crude oil approached levels close to $150 a barrel.

“We expect the crude oil market to remain under-supplied and inventories to continue to draw,” the bank said. “This will likely underpin prices.”