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.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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