Fundamentals are relatively loose It is expected that the low and high sulfur prices in the future market will closely follow the crude oil

High and low sulfur fuel oil market review

Futures market: low and high sulfur fuel oil prices rebounded overnight, and the FU2301 contract rose 52 yuan / ton, or 1.
96%, to close at 2700 yuan / ton; The low-sulfur futures 2301 contract rose 64 yuan/ton, or 1.
34%, to close at 4831 yuan/tonne
.

Spot market: On October 27, the spot premium of fuel oil supplied by low-sulfur ships in Zhoushan area was 406 yuan / ton (corresponding to the LU2212 contract), and the daily premium increased by 46 yuan / ton
.

【Important Information】

(1) The EIA reported that U.
S.
crude oil inventories increased by 2.
6 million barrels in the week ended Oct.
20, but gasoline inventories fell by 1.
5 million barrels
.

(2) According to CME "Fed Watch": the probability of the Fed raising interest rates by 50 basis points to the range of 3.
50%-3.
75% in November is 18.
6%, and the probability of raising interest rates by 75 basis points is 81.
4%; The probability of a cumulative 100 basis point hike by December is 10.
1%, the probability of a cumulative 125 basis point hike is 52.
8%, and the probability of a cumulative 150 basis point hike is 37.
1%.

(3) According to customs data, in September 2022, the source countries of China's imported fuel oil were the United Arab Emirates (385,700 tons), the Russian Federation (283,700 tons), Singapore (122,800 tons), Italy (79,700 tons), the Netherlands (63,500 tons), South Korea (52,900 tons), and Malaysia (49,000 tons).

(4) 20221021-1027), the atmospheric decompression capacity utilization rate of China's independent refined oil refinery was 64.
82%, down 0.
15 percentage points from the previous month
.

【Arbitrage Strategy】

Import and export data show that Russian fuel oil continues to impact the Asian market, high-sulfur spot discount situation continues, low-sulfur fuel oil: Western arbitrage cargo inflow increased, Asian fuel oil market is abundant, it is estimated that about 2.
5 million to 3 million tons of Western arbitrage fuel oil arrived in Asia this month, the highest monthly arrival this
year.
The fundamentals of low and high sulfur are relatively loose, and the crack spread of low and high sulfur fuel oil in the future market is expected to continue to show a weak trend
.

【Trading Strategy】

Cost: Crude oil remains in a tight supply and recession expectations, boosting crude oil prices
as the dollar index declines and U.
S.
gasoline inventories continue to fall.

Fuel oil supply and demand: fuel oil inventories in Singapore accumulate, Russian fuel oil continues to impact the Asian market, the high-sulfur spot discount situation continues, and the high-sulfur supply and demand fundamentals continue to
be loose.

Low-sulfur fuel oil fundamentals: Western low-sulfur arbitrage cargo inflows have increased, and the Asian low-sulfur fuel oil market is well supplied, with an estimated 2.
5-3 million tons of Western arbitrage fuel oil arriving in Asia this month, the highest monthly arrival this
year.

In general, the price of low-sulfur fuel oil has rebounded recently, boosted by crude oil prices, but due to the weak fundamentals of low-high sulfur itself, it is expected that the low-high sulfur price in the aftermarket will closely follow crude oil or be weaker than crude oil
.