Market Analysis
The main contract of fuel oil futures on the Shanghai Futures Exchange closed up 2.08% in yesterday's day session at 5,405 yuan per ton, while the main contract of INE low-sulfur fuel oil futures closed up 2.15% at 4,465 yuan per ton.
The geopolitical situation in the Middle East remains at a stalemate, and navigation through the Strait of Hormuz has not yet substantially recovered.
Amid limited supply and elevated freight rates, the fundamentals and market structure of fuel oil remain on the stronger side, with FU and LU futures fluctuating upward.
Potential bearish factors to note at present include the possibility that refineries, after seeing their margins squeezed, may reduce procurement demand for VGO and residue feedstock.
In addition, against the backdrop of persistently strengthening international natural gas prices, demand for fuel oil from power generation end-users could receive an additional boost.
Given that fuel oil used in many regions during winter has a sulfur content within 1%, this provides a positive driver for both the high-sulfur and low-sulfur markets.
Strategy
High-sulfur: range-bound with a stronger bias, watch the direction of the Middle East situation
Low-sulfur: range-bound with a stronger bias, watch the direction of the Middle East situation
Inter-commodity: none
Inter-temporal: none
Futures-spot: none
Options: none
Risks
Geopolitical conflict, macroeconomic risks, tariff risks, sanctions risks, sharp fluctuations in crude oil prices, power generation demand changes exceeding expectations, bunker fuel demand changes exceeding expectations, and Middle East and Russian export changes exceeding expectations.
Comments