20250622-国泰期货-Fuel_Oil_Market_Report_Weekly_27页_3mb

Fuel Oil Market Weekly Analysis Summary

Market Review

• Globally, fuel oil prices continued to rise this week due to escalations in geopolitical conflicts, particularly between Iran and Israel. This led to higher crude oil and related fuel oil prices, reaching annual highs. HSFO (Heavy Sulphur Fuel Oil) cracking and monthly spread saw slight decreases from peak levels, while LSFO (Light Sulphur Fuel Oil) remained relatively strong in the short term.

Supply Dynamics

• The Middle East's export volume has remained stable in the short term, with no significant impact yet from current tensions. Supply-side constraints may limit the upside for HSFO prices until a substantial decline occurs. For LSFO, exports to Asia from Brazil and Northwest Europe have decreased, easing supply-demand pressure in the Pacific region and supporting price increases.

Demand Factors

• On the demand side, geopolitical risks and improving supply-demand balance contributed to price rises. Although LSFO demand faces squeezing from HSFO in ship fuel, the reduction in Asian imports has lifted LSFO cracks and spreads in Singapore. This imbalance is expected to persist until Middle East supply issues resolve.

Outlook and Forecasts

• From a fundamental perspective, the core risk premium from the Strait of Hormuz navigation concerns remains embedded in fuel oil prices. If geopolitical risks subside, prices could normalize, but currently, there is limited upside for HSFO due to stable supplies. For LSFO, the imminent recovery of domestic refinery production in China and other regions may lead to higher spot supply, potentially weakening LU (LU futures) relative to overseas markets. Overall, prices face support from short-term fundamentals but require supply-side disruptions for sustained increases.

Key Takeaways

• Price Drivers: Geopolitical tensions underpin current price hikes; demand-side strength offsets some supply constraints.
• Inventory and Balance: Global inventories vary by region, with tightness easing in some areas like Asia-Pacific due to reduced exports.
• Futures Market: HSFO's monthly spread and cracking suggest limited room for growth, while LSFO shows volatility with improving supply-demand dynamics.