Mid-term prospects for low-sulfur fuel oil market can be expected

Recently, the price of low-sulfur fuel oil has been weak as a whole, and the unilateral price of internal and external disks, the cracking price difference, and the monthly difference have all shown a downward trend.

The sharp correction of crude oil drives the unilateral decline in fuel oil prices

The main factor that drags down the oil market lies on the demand side.

The specific manifestations are as follows: First, there are signs of a rebound in the epidemic in Brazil and Europe, and European countries have restarted blockade measures.
What is even more worrying is the side effects of some vaccines, and the vaccination schedule in some countries may not meet expectations, which will slow down the pace of recovery in crude oil consumption.

The fundamentals of low-sulfur fuel oil are also showing a marginal weakening trend

From the supply-side analysis, due to the low-sulfur fuel oil gap that has risen to a relatively high level before, the upward production profit has attracted many refineries to increase production.

In addition, the recent pressure on the diesel market has caused more components to flow into the blending pool of low-sulfur fuel oil, bringing new supply increments to the market.
From the demand side analysis, with the end of winter, the demand for fuel oil in consumption areas such as Japan and South Korea has gradually fallen.

Low-sulfur fuel oil market structure or major changes

From a mid-term perspective, the market structure of low-sulfur fuel oil (unilateral price, gap, and monthly gap) may undergo major changes.

We believe that oil prices still have room for upside in the future, and short-term pressure comes from repeated epidemics and seasonal maintenance.
As global refineries gradually recover from overhauls, demand for crude oil purchases is expected to increase.

　　As far as the fundamentals of low-sulfur fuel oil are concerned, in the medium term, it is also expected to get a new upward drive, mainly from the recovery of terminal demand after the epidemic is under control.

From the perspective of low-sulfur fuel oil consumption terminals, there is still considerable room for improvement in the shipping industry.

　　In short, the price of low-sulfur fuel oil in the short-term is facing upward pressure.

However, as the global epidemic is brought under control and the crude oil price center rises further, the medium-term prospects for the low-sulfur fuel oil market can be expected.

　　Transfer from: Huatai Futures

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