In the fuel oil segment on September 8, daytime trading closed with FU11 at 3,988 yuan per tonne, up 4.97% from the previous session, while LU10 settled at 5,219 yuan per tonne, marking a 5.05% increase. Geopolitical tensions remain elevated, as Houthi military spokespersons announced plans for large-scale operations deep within Saudi territory during the midday session, which helped lift prices across the broader energy complex. The high-sulphur versus low-sulphur spread continued to widen, with the LU10-FU11 contract gap closing at 1,312 yuan per tonne on September 8, up from 1,278 yuan per tonne on September 7.
Turning to the fundamental picture, the September 8 daytime close for the FU front-month to third-month spread came in at 203, up 12% from the prior day's 182, while the LU front-to-third spread closed at 389, a 14% gain from 341 a day earlier. The diesel crack spread against Brent settled at $83.36 per barrel, down 2% from the previous session. In the near term, high-sulphur and low-sulphur contracts remain on divergent paths: high-sulphur fundamentals are easing at the margin while low-sulphur stays in a tight balance, keeping the spread on an upward trajectory. With demand-side support weakening, any upside in high-sulphur fuel is largely a bet on geopolitical developments, whereas low-sulphur retains structural backing from diesel. Looking ahead, monitoring the Strait of Hormuz transit and geopolitical shifts will be key; high-sulphur is likely to underperform low-sulphur, leaving room for the spread to expand further. On a single-price basis, chasing current highs offers limited value, so we expect high-level, wide-range volatility in the short term. A strategy of shorting far-month high-sulphur contracts on rallies is advisable.
In the bitumen market, September 8 daytime trading saw BU10 close at 5,211 yuan per tonne, up 4.10%. The BU10-FU11 spread narrowed slightly to 1,223 yuan per tonne on September 8 from 1,232 yuan per tonne on September 7. Regional heavy-grade bitumen spot prices hovered around 5,300 yuan per tonne or higher on September 8, with futures tracking spot higher while the basis remains positive and has firmed modestly. The fundamental backdrop points to a strong spot regime characterized by low operating rates, low inventories, a wide positive basis, and a deeply backwardated curve. During the September-October peak demand window, supply gaps from maintenance shutdowns and production switches should continue to underpin prices, making a stronger BU front-month contract the more likely scenario. However, absolute prices are approaching historical highs, and Shandong production margins exceeding 1,000 yuan per tonne will incentivize refinery restarts. Far-month deep discounts already price in a looser supply-demand balance for the fourth quarter, so near-term expectations call for modest gains within a range. The previously flagged breakout above 5,200 has now been confirmed; further upside depends on how firmly spot prices can hold, though elevated prices could dampen demand, warranting caution around a potential spot inflection point. Overall, the stance remains cautiously optimistic. We continue to trade the BU-FU spread on a rolling basis, buying low and selling high. The impact of Venezuelan feedstock on BU remains profound, requiring increasingly costly substitutes.
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