OSLO (Reuters) - Energy trader Vistin Trading, a part of pharmaceutical company Vistin Pharma, sees big trading opportunities ahead of new stricter shipping fuel regulations in 2020 and plans to set up two new funds by the end of the year.
The International Maritime Organisation’s (IMO) new regulations come into force from 2020, requiring shipping firms to use fuel oil with a sulfur content at 0.5 percent, down from 3.5 percent now or invest in cleaning systems, so-called “scrubbers” on their vessels.
“We believe the market is mispricing both residual fuel oil (high sulfur fuel oil) and & gasoil (low sulfur fuel oil),” oil analyst Torbjoern Kjus trading told a presentation in Oslo.
The spread is currently about $300 per tonne.
“30,000 scrubbers have to be installed the next 16 months (if shipping firms should comply with new IMO rules) if not, there should be a problem for the refineries. Of course it will not happen, we might reach 2,000 scrubbers,” Kjus said.
Vistin Trading was established in March this year through a private placement of 300 million Norwegian crowns ($36.5 million) in Vistin Pharma.
“Part of Vistin Pharma’s strategy is to invest in asymmetrical investment opportunities caused by fundamental changes in the oil space,” the firm said.
“We will probably set up two funds before the year-end, we can’t give the size yet,” Kjus said.
Kjus expects the price of low sulfur fuel oil to rise because of higher demand to comply with new rules and constraints at refineries.
This again could also lead to higher prices of jet fuel for airlines, his partner Kenneth Tveter, said on the sidelines of the conference.
Kjus is a former oil market analyst at broker DNB Markets in Oslo and was early in predicting the oil price crash in late 2014. Tveter has been working at DNB Markets in New York.
Kjus also predicted higher freight rates and 0.5 million barrels of oil equivalent per day (boepd) in extra oil demand as side-effects of the fuel standard change.
($1 = 8.2252 Norwegian crowns)
Reporting By Ole Petter Skonnord, editing by David Evans