Crude Oil Volatility Boosts Fuel Oil, Both High and Low Sulfur Prices Hit New Highs
On the eve of New Year's Day, the crude oil market experienced a volatile rise, providing a boost to fuel oil. The main contract of futures exchange fuel oil (FU2503) rose by 1.56%, closing at 3,326 yuan/ton; the main contract of Shanghai International Energy Exchange low sulfur fuel oil (LU2503) rose by 1.62%, closing at 4,005 yuan/ton. Both high and low sulfur fuel oil prices increased, reaching recent highs.
High Sulfur Fuel Oil Prices Remain Strong with Robust Fundamental Support
High sulfur fuel oil prices showed strong performance with a firm market structure. Geopolitical factors, especially the marginal tightening of Iranian fuel oil supply, supported the Asian market. However, with changes in winter supply and demand, the high sulfur fuel oil market may also face expectations of marginal weakness.
Industry analysts pointed out that although the market remains strong recently, changes in winter demand and the global fuel oil supply-demand landscape need to be closely monitored.
Low Sulfur Fuel Oil Stabilizes in the Short Term, Medium Term Pressure Emerges
The low sulfur fuel oil market has recently stabilized, with the first batch of 2025 export quotas remaining the same as 2024, and domestic production expected to gradually recover. Meanwhile, maintenance at some overseas refineries and the increase in winter demand provide short-term support to the market.
However, in the medium term, the market still faces pressure. On one hand, global spare capacity is relatively ample; on the other hand, the trend of low sulfur fuel oil's market share being replaced in the downstream marine fuel market remains unchanged. Analysts believe that the future LU valuation may face new downside risks.
Market Outlook: Short-term Strength, Medium-term Challenges
With increasing uncertainty in the global energy market, fuel oil prices may maintain a trend of volatile rises in the short term, but medium-term fundamental pressures will gradually emerge. Investors need to pay attention to geopolitical developments, refinery maintenance progress, and changes in demand, to manage the market's rhythm and address potential risks.
