Report Overview - The report is the second in a series on the correlation analysis and arbitrage strategy principles of BU-FU-LU futures, focusing on the feasibility study of arbitrage strategies between asphalt and fuel oil [2]. - It aims to understand the industrial relationship between asphalt and fuel oil, review significant historical fluctuations in their price spreads, and provide trading suggestions for 2025 based on statistical analysis [2]. Industry Investment Rating - Not provided in the report. Core Viewpoints - Asphalt and fuel oil are parallel products at the refining production end, with their raw materials mainly from heavy components produced by primary refinery units. However, their downstream applications, supply-demand patterns, and pricing methods differ significantly [5]. - The fundamental situation has evolved from LU being significantly stronger than BU and FU, and BU being stronger than FU, to the current situation where FU has good demand, BU has weak supply and demand, and LU has oversupply. In 2025, opportunities for narrowing BU-FU spreads and widening BU-LU spreads should be actively sought [58]. - The statistical analysis of historical spread data shows that the BU-FU spread has a trending nature when converging, and the BU-LU spread has a rolling mean reversion property, which can assist in spread trading [60]. Summary by Directory 1. Understanding the Relationship between Asphalt and Fuel Oil from the Industrial Chain Perspective - At the refining production end, straight-run fuel oil, the heaviest component produced by atmospheric and vacuum distillation of crude oil, can be used as a raw material for asphalt production. It can also be directly sold or processed into different types of fuel oil [5]. - In the downstream, asphalt is mainly used for road and waterproofing purposes, while fuel oil is mainly used for marine fuel, power generation, and as a secondary raw material. Their supply-demand patterns and pricing methods also differ significantly [6]. 2. Review of Historical Major Fluctuations in Asphalt and Fuel Oil Price Spreads 2.1 2021 - 2022: Tightening Raw Materials and Demand Recovery Drove Asphalt to Strengthen, with High-Sulfur Fuel Oil Continuously Weaker than Low-Sulfur Fuel Oil - From April to May 2021, BU was significantly stronger than FU and LU. Positive infrastructure expectations and the tax increase on diluted asphalt were the main drivers. The tax increase on diluted asphalt increased the direct cost of this popular raw material for local refineries by 1,276 yuan/ton, about 1/3 of the market price [14][15]. - In 2022, due to sanctions on Russia, the supply of high-sulfur fuel oil in Asia increased significantly, while the demand for low-sulfur fuel oil remained dominant in the global marine fuel market. The price of high-sulfur fuel oil rose less than that of low-sulfur fuel oil and diesel. In contrast, the asphalt market gradually improved, and the BU-FU spread accelerated upward in the third quarter and reached its annual high in the fourth quarter. The BU-LU spread initially declined and then recovered [16]. 2.2 2023 - 2024: Continuous Improvement in High-Sulfur Supply-Demand Pattern, with the BU-FU Spread Continuously Narrowing - From March to August 2023, the BU-FU and BU-LU spreads both narrowed, especially the BU-FU spread. The strengthening of high-sulfur fuel oil was mainly driven by demand, including increased demand in the Singapore marine fuel market, power generation in the Middle East and South Asia, and refinery processing in China. In contrast, the asphalt market was weak, although there were some short-term supports [31]. - In 2024, the focus of the fuel oil market shifted from demand to supply. Drone attacks on Russian refineries led to a significant reduction in fuel oil exports, pushing up the price of high-sulfur fuel oil in Asia. The asphalt market had weak demand and supply, resulting in a continuous narrowing of the BU-FU spread. The BU-LU spread gradually rebounded from the bottom [35]. 2.3 2025: The BU-FU Spread May Continue to Narrow in the Second Quarter, and the BU-LU Spread May Expand in the Second Half of the Year - In 2025, the demand for high-sulfur fuel oil remains promising, while the asphalt market has relatively balanced supply and demand, and the low-sulfur fuel oil market has overall loose supply and weak consumption prospects [39]. - In the second quarter, the demand for fuel oil is strong, while the demand for asphalt may be weak due to possible continuous rainfall in the south. The BU-FU spread may continue to narrow. In the third and fourth quarters, the demand for asphalt is expected to improve seasonally, while the demand for low-sulfur fuel oil may be weak. The BU-LU spread may expand [41]. 3. Statistical Analysis of Asphalt and Fuel Oil Price Spreads and Specific Strategy Applications - Descriptive statistics show that the BU-FU spread has a right-skewed and low-kurtosis distribution, indicating that BU is relatively stronger than FU with a slightly higher probability. The BU-LU spread has a left-skewed distribution closer to the normal distribution, with a lower probability of extreme values [52]. - The BU-FU and BU-LU spread sequences are not stationary time series, but their first-order differences are stationary. This suggests that the spread volatility may have relatively fixed statistical laws [52]. - For the BU-FU spread, a trend-tracking strategy is suitable, especially when the trend is established and strengthened. For the BU-LU spread, a statistical arbitrage strategy based on rolling mean reversion can be considered [53]. - The analysis of 2025 data shows that the BU-FU spread has shifted from right-skewed to left-skewed, with an increased probability of extreme fluctuations. The BU-LU spread has a deeper left-skew, but the probability of extreme low values has decreased [55].

Report Summary 1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - Although there are issues such as inverted price differences between fat pigs in the north and south, reduced piglet sales by groups, and increased pen pressure in May, price increases have led to continued inventory accumulation. The near - term contradictions are not at the release stage. The trading logic has switched to the industrial logic, and attention should be paid to the arbitrage strategy of the far - month inter - monthly spread valuation deviating from the norm. In the medium - to - long - term, continue to layout the 11 - 1 reverse spread, and pay attention to stop - profit and stop - loss. The short - term support level of the LH2509 contract is 13,000 yuan/ton, and the pressure level is 15,000 yuan/ton [5]. 3. Summary by Relevant Catalogs 3.1 Pig Fundamental Data - **Spot Prices**: The spot price of pigs in Henan is 15,000 yuan/ton, in Sichuan is 14,450 yuan/ton (down 100 yuan/ton compared to the previous period), and in Guangdong is 15,190 yuan/ton [3]. - **Futures Prices**: The price of the live hog 2507 contract is 13,495 yuan/ton (down 150 yuan/ton), the 2509 contract is 13,780 yuan/ton (down 240 yuan/ton), and the 2511 contract is 13,550 yuan/ton (down 105 yuan/ton) [3]. - **Trading Volume and Open Interest**: The trading volume of the live hog 2507 contract is 9,989 lots (an increase of 2,918 lots compared to the previous day), with an open interest of 27,584 lots (a decrease of 706 lots); the 2509 contract has a trading volume of 40,357 lots (an increase of 12,323 lots), with an open interest of 77,561 lots (an increase of 5,221 lots); the 2511 contract has a trading volume of 6,572 lots (an increase of 3,358 lots), with an open interest of 30,277 lots (an increase of 837 lots) [3]. - **Price Spreads**: The basis of the live hog 2507 contract is 1,505 yuan/ton (an increase of 150 yuan/ton), the 2509 contract is 1,220 yuan/ton (an increase of 240 yuan/ton), and the 2511 contract is 1,450 yuan/ton (an increase of 105 yuan/ton). The 7 - 9 spread is - 285 yuan/ton (an increase of 90 yuan/ton), and the 9 - 11 spread is 230 yuan/ton (a decrease of 135 yuan/ton) [3]. 3.2 Trend Intensity - The trend intensity is 0, with the range of values in the [-2, 2] interval for integers. It represents a neutral state [4]. 3.3 Market Logic - The trading logic has switched to the industrial logic. Focus on the far - month inter - monthly spread valuation deviating from the norm for arbitrage strategies. In the medium - to - long - term, continue to layout the 11 - 1 reverse spread and pay attention to stop - profit and stop - loss. The short - term support level of the LH2509 contract is 13,000 yuan/ton, and the pressure level is 15,000 yuan/ton [5].

Report Summary 1. Report Industry Investment Rating - The trend strength is 0, indicating a neutral stance. The range of trend strength is from -2 to 2, where -2 means most bearish and 2 means most bullish [2]. 2. Core Viewpoints - The current situation shows that the price difference between fat pigs in the north and south is inverted, the sale of group piglets has decreased, and the pen pressure in May has slightly increased. However, the price has continuously exceeded expectations, leading to the continuation of inventory accumulation. Attention should be paid to the inventory accumulation rhythm, and the near - end contradiction has not reached the release stage. The trading logic has switched to the industrial logic, focusing on the arbitrage strategy of the valuation deviation of the far - month inter - month spread from the normal state. In the medium and long term, continue to layout the 11 - 1 reverse spread, and pay attention to stop - profit and stop - loss. The short - term support level for the LH2509 contract is 13,000 yuan/ton, and the pressure level is 15,000 yuan/ton [3]. 3. Summary by Relevant Catalogs 3.1 Fundamental Tracking - **Spot Prices**: The spot price of pigs in Henan is 15,000 yuan/ton, in Sichuan is 14,550 yuan/ton, and in Guangdong is 15,190 yuan/ton, with a year - on - year change of 0 for all [1]. - **Futures Prices**: The price of the pig 2507 contract is 13,645 yuan/ton (year - on - year increase of 70), the pig 2509 contract is 14,020 yuan/ton (year - on - year increase of 135), and the pig 2511 contract is 13,655 yuan/ton (year - on - year increase of 65) [1]. - **Futures Trading Volume and Open Interest**: The trading volume of the pig 2507 contract is 7,071 lots (an increase of 3,806 compared to the previous day), and the open interest is 28,290 lots (a decrease of 652 compared to the previous day). The trading volume of the pig 2509 contract is 28,034 lots (an increase of 14,102 compared to the previous day), and the open interest is 72,340 lots (an increase of 1,078 compared to the previous day). The trading volume of the pig 2511 contract is 3,214 lots (an increase of 1,338 compared to the previous day), and the open interest is 29,440 lots (a decrease of 244 compared to the previous day) [1][3]. 3.2 Market Logic - The current market logic has shifted from macro - driven to industry - driven. Attention should be paid to the arbitrage strategy of the far - month inter - month spread valuation deviation from the normal state, and continue to layout the 11 - 1 reverse spread in the medium and long term. The short - term support and pressure levels for the LH2509 contract are given [3]. 3.3 Basis and Spread Data - The basis of the pig 2507 contract is - 65 yuan/ton, the pig 2509 contract is 365 yuan/ton, and the pig 2511 contract is 70 yuan/ton. The 7 - 9 spread is - 375 yuan/ton, and the 9 - 11 spread is 980 yuan/ton, with corresponding year - on - year changes [3].

Report Summary 1. Report Industry Investment Rating - Not provided in the report 2. Core View of the Report - In April, the progress of second - fattening procurement was over half, the sentiment of chasing high - price purchases cooled down, the group's supply volume decreased significantly during the holiday, and the spot price changed little. Currently, the price spreads between fat and standard pigs are inverted in both the north and the south, the group's piglet sales have decreased, the pen pressure in May has increased slightly, and staged de - stocking may start. The macro sentiment has cooled down, the capital disturbance has decreased, and the trading logic has switched to the industrial logic. Attention should be focused on the arbitrage strategy of the valuation deviation of the far - month inter - monthly spreads from the normal state. The liquidity of the 11 - 1 reverse spread is gradually increasing, and attention should be paid to stop - profit and stop - loss. The short - term support level of the LH2509 contract is 13,000 yuan/ton, and the pressure level is 15,000 yuan/ton [4] 3. Summary by Relevant Catalogs 3.1 Pig Fundamental Data - **Spot Prices**: The Henan spot price is 14,850 yuan/ton with a year - on - year increase of 100 yuan/ton; the Sichuan spot price is 14,450 yuan/ton with a year - on - year increase of 50 yuan/ton; the Guangdong spot price is 15,590 yuan/ton with no year - on - year change [2] - **Futures Prices**: The price of the Live Pig 2507 contract is 13,445 yuan/ton with a year - on - year decrease of 5 yuan/ton; the price of the Live Pig 2509 contract is 13,910 yuan/ton with a year - on - year decrease of 20 yuan/ton; the price of the Live Pig 2511 contract is 13,530 yuan/ton with a year - on - year decrease of 80 yuan/ton [2] - **Trading Volume and Open Interest**: The trading volume of the Live Pig 2507 contract is 5,632 lots, a decrease of 1,232 lots from the previous day, and the open interest is 31,498 lots, a decrease of 1,022 lots from the previous day; the trading volume of the Live Pig 2509 contract is 23,428 lots, a decrease of 15,573 lots from the previous day, and the open interest is 69,728 lots, a decrease of 3,220 lots from the previous day; the trading volume of the Live Pig 2511 contract is 4,524 lots, a decrease of 2,279 lots from the previous day, and the open interest is 27,719 lots, an increase of 103 lots from the previous day [2] - **Price Spreads**: The basis of the Live Pig 2507 contract is 1,405 yuan/ton with a year - on - year increase of 105 yuan/ton; the basis of the Live Pig 2509 contract is 940 yuan/ton with a year - on - year increase of 120 yuan/ton; the basis of the Live Pig 2511 contract is 1,320 yuan/ton with a year - on - year increase of 180 yuan/ton; the 7 - 9 spread of live pigs is - 465 yuan/ton with a year - on - year increase of 15 yuan/ton; the 9 - 11 spread of live pigs is 380 yuan/ton with a year - on - year increase of 60 yuan/ton [2] 3.2 Trend Intensity - The trend intensity is 0, with the value range being integers in the [- 2,2] interval. The strength levels are classified as weak, relatively weak, neutral, relatively strong, and strong, where - 2 represents the most bearish and 2 represents the most bullish [3] 3.3 Market Logic - The trading logic has switched to the industrial logic, and attention should be paid to the arbitrage strategy of the valuation deviation of the far - month inter - monthly spreads from the normal state. The liquidity of the 11 - 1 reverse spread is gradually increasing, and attention should be paid to stop - profit and stop - loss. The short - term support level of the LH2509 contract is 13,000 yuan/ton, and the pressure level is 15,000 yuan/ton [4]