VLSFO is the marine fuel grade created by the IMO 2020 sulphur regulations. Before January 2020, the global fleet ran primarily on High Sulphur Fuel Oil (HFO 3.5%); the sulphur cap required the industry to transition to VLSFO or install exhaust gas scrubbers to continue burning HFO.
Marine Fuel Types Comparison
| Fuel | Sulphur max | Use | Relative cost |
|---|---|---|---|
| VLSFO (IMO 2020) | 0.50% | Open ocean (global) | Reference (100%) |
| MGO / DMA | 0.10% | ECA zones (North Sea, Baltic, US coast) | ~115–125% |
| LSMGO | 0.10% | ECA zones, low-viscosity engines | ~115–120% |
| HFO 3.5% | 3.50% | Scrubber-fitted vessels only | ~70–80% |
| LNG | ~0% | Dual-fuel vessels | Variable (LNG market price) |
VLSFO Price Formation
VLSFO is priced at major bunkering ports: Rotterdam, Singapore, Fujairah. Key price relationships:
- VLSFO typically trades at approximately 0.60–0.75× Brent crude on a $/MT basis
- The Hi-5 spread (VLSFO minus HFO 3.5%) determines the economic payback on scrubber installation
- The crack spread to Brent narrows when refinery VLSFO output is high and widens when production is constrained
- Singapore is the world's largest bunkering port and the primary Asian VLSFO price discovery hub
VLSFO vs HSFO — Scrubber Economics
Ship operators face a choice: pay the VLSFO premium or install a scrubber (EGCS) and continue burning cheaper HFO. The payback period for a scrubber installation (typically $3–6M) depends on the Hi-5 spread — when VLSFO trades $100–200/MT above HFO, a large VLCC recoups the scrubber cost in under 2 years.
Frequently Asked Questions
- What is VLSFO?
VLSFO (Very Low Sulphur Fuel Oil) is a category of marine residual fuel oil with a maximum sulphur content of 0.50% m/m, complying with the IMO 2020 global sulphur cap. It is typically produced by blending straight-run residual fuel with low-sulphur distillate or desulphurised components to achieve the required sulphur level while maintaining viscosity suitable for engine use.
- What is IMO 2020 and how did it affect bunker fuel?
IMO 2020 is the International Maritime Organisation's global sulphur cap regulation that took effect on 1 January 2020. It reduced the maximum permitted sulphur content in marine fuel from 3.5% (HFO) to 0.5% (VLSFO) for all vessels operating outside Emission Control Areas (ECAs). ECA zones (North Sea, Baltic, US Coastal) require 0.1% sulphur MGO. IMO 2020 fundamentally restructured the global bunker market.
- What is the difference between VLSFO and MGO?
VLSFO (0.5% S) is a heavy residual fuel suitable for most ocean-going vessels' main engines. MGO (Marine Gas Oil, DMA grade, max 0.1% S) is a distillate fuel required in ECA zones. MGO is more expensive than VLSFO by $80–200/MT typically. Vessels with scrubbers (EGCS) can burn HFO 3.5% globally and avoid the VLSFO premium.