Forget Iran and OPEC. There’s another issue that will keep oil prices supported for the next two years, according to Morgan Stanley’s oil outlook.
Brent crude will reach $90 a barrel by 2020 as new international shipping regulations take effect. The regulations will overhaul the types of fuels produced by refiners, the bank’s analysts said in a report.
The changes will force vessels to consume lower sulfur fuels beginning in January 2020. This will lead to a boom in demand for middle distillate products including diesel and marine gas oil, triggering the need for more crude, they said.
“We foresee a scramble for middle distillates that will drive crack spreads higher and drag oil prices with it,” wrote Morgan Stanley analysts including Martijn Rats.
Rules Add To Supply Cuts
Crude has already received a price boost due to OPEC supply cuts, geopolitical events and the U.S. decision to reimpose sanctions on Iran. The regulatory changes will add to the impact. Global benchmark Brent, which neared $80 a barrel earlier this week, is trading at the highest levels since late 2014. Futures for the January 2020 contract are at about $66.60 a barrel.
The International Maritime Organization’s rule changes will call for ships to reduce the maximum …read more
Via:: IBD Futures