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Billion-Dollar Trade

Posted November 19, 2019

Royal Dutch Shell just rang the bell celebrating the fact that it made $1 billion from trading fuel oil this year.

It was able to use the new IMO 2020 rules designed to reduce shipping pollution to make a fortune. And you can, too.

According to Bloomberg:

Shell said that it made substantial money in fuel-oil trading in the third quarter. Shell traders celebrated hitting the $1 billion mark so far, likely the biggest by any one company in fuel oil this year, by ringing a bell on the company’s trading floor in London earlier this month.

The fuel-oil market has been shaken this year by the so-called IMO 2020 new regulations that ban the use of high-sulfur fuel oil, known as HSFO, to power ships. The rules are aimed at combating human health conditions such as asthma and environmental damage including acid rain. Prices are collapsing because the global shipping fleet, which burns more than 3% of the world’s oil, will instead have to consume very low sulfur fuel-oil, or VLSFO.

These news rules, called the IMO 2020 Sulfur Cap, will be instituted on January 1, 2020. IMO stands for International Maritime Organization, which is a United Nations group formed after the sinking of the Titanic. It sets global shipping rules.

Here is the reasoning from the IMO website. It’s a little boring, but it can be quite profitable.

The main type of “bunker” oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulphur which, following combustion in the engine, ends up in ship emissions. Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans.

Limiting SOx emissions from ships will improve air quality and protects the environment.

IMO regulations to reduce sulphur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulphur oxides have been progressively tightened.

From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass). This will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.

Of course, these nameless bureaucrats don’t know what they are doing. The world produces a lot of high-sulfur fuels and not so much low-sulfur. After January 1, there could be a million barrels a day difference between supply and demand.

The spread between high- and low-sulfur fuel oil shot up to almost $30 a barrel in late October, compared with an average of about $2 a barrel in 2018. This will go much higher over the next two months.

There are less than 42 days until the deadline hits, and many people think the global shipping and refining industry won’t be ready. There are two ways to make money: Buy the refiners that will produce the most LSFO with the lowest cost, and buy the shipping companies that have installed scrubbers, which convert HSFO to LSFO, because they will be buying the old stuff on the cheap.

I’ve found both ways to profit. Click here now for your free report. But hurry — time is running out.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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