Residual Fuel

As a follow up to last week, in the September issue of OPEC's monthly oil market report, on page 30 they show a pie chart of the projected demand growth for the various refinery products from 2010 to 2011. OPEC predicts a 1,0 million barrel/day increase in oil demand for 2011 and predicts all products to increase - except for residual fuel. OPEC predicts a decline in residual oil by 143,000 barrels/ day for the coming year.

In the previous blog I stated that according to data published by the IEA residual fuel represented 15.1% of global refinery output in 2008. Based on that figure the 143,000 barrel reduction in residual fuel, for the coming year, represents essentially a 1.1% drop in the supply of feed stock for heavy fuel blending. In other words, the quality of the blended fuel will continue to deteriorate and availability of IMO compliant HFO may become an issue, maybe not immediately but probably in the long term.