1. Report Industry Investment Rating - High-sulfur fuel oil: Sideways [3] - Low-sulfur fuel oil: Sideways [3] 2. Core Viewpoints of the Report - The crack spread of high-sulfur fuel oil continues to decline. Although there are still structural supporting factors, the crack spread needs further adjustment to attract the recovery of refinery demand. After sufficient adjustment and significant return of refinery demand, the market will regain support [1]. - The current market pressure of low-sulfur fuel oil is limited, but there is no obvious driving force. In the medium term, the carbon neutrality trend in the shipping industry will gradually replace the market share of low-sulfur fuel oil, suppressing its market prospects. The current market structure of low-sulfur fuel oil is slightly stronger than that of high-sulfur fuel oil, and the high-low sulfur spread has recently widened, but it does not have the space for a substantial increase [2]. 3. Summary by Relevant Catalogs Market Analysis - The main contract of Shanghai Futures Exchange fuel oil futures closed down 2.71% at 2,840 yuan/ton, and the main contract of INE low-sulfur fuel oil futures closed down 1.09% at 3,639 yuan/ton [1]. - Recently, the crude oil price has been oscillating strongly. The unilateral prices of FU and LU are supported by the cost side, but there is an expectation of a looser balance sheet in the medium-term crude oil market, which may limit the upside space of prices. The slight retreat of oil prices yesterday also reflects that resistance has begun to appear after continuous rebounds [1]. - In the high-sulfur fuel oil market, the market structure maintains a weak operation. The spot premium, time spread, and crack spread have continued to decline. In particular, the crack spread has significantly retreated from the high level. The spot supply is relatively abundant, and the inventory level is high. Although the actual production increase of countries such as Saudi Arabia is likely to be less than the quota, the policy trend has been formed. During the peak summer electricity consumption season, Saudi power plants will increase the proportion of crude oil use, which can meet their own needs and reduce the supply pressure on the international crude oil market. The corresponding fuel oil demand may decline year-on-year. The recent significant increase in the shipment volume of high-sulfur fuel oil in the Middle East also confirms this trend [1]. - In the low-sulfur fuel oil market, the current market pressure is limited, but there is no obvious driving force. After the maintenance season of domestic refineries ended in June, the domestic production of low-sulfur fuel oil has rebounded, but it is still lower than the same period last year, and the short-term supply increase is limited. In the medium term, the carbon neutrality trend in the shipping industry will gradually replace the market share of low-sulfur fuel oil, suppressing its market prospects [2]. Strategy - High-sulfur: Short the FU crack spread (FU-Brent or FU-SC) on rallies [3] - Low-sulfur: None [3] - Inter-variety: Short the FU crack spread (FU-Brent or FU-SC) on rallies [3] - Inter-period: Short the FU2509-FU2510 spread on rallies [3] - Spot-futures: None [3] - Options: None [3]