Report Industry Investment Rating - High-sulfur fuel oil: Cautiously bearish, short-term focus on the progress of China-US tariff negotiations [7] - Low-sulfur fuel oil: Cautiously bearish, short-term focus on the progress of China-US tariff negotiations [7] - Cross-variety: None [7] - Cross-period: None [7] - Spot-futures: None [7] - Options: None [7] Core Viewpoints - The fuel oil futures market is under pressure as the peak season ends, the crude oil fundamentals weaken, and macro risks increase. Both high-sulfur and low-sulfur fuel oil face challenges in supply, demand, and market structure [1]. - The supply of high-sulfur fuel oil may increase due to the easing of the Middle East situation and the release of OPEC's production capacity, while the supply of low-sulfur fuel oil has seen a recent increase but is expected to ease [2][3]. - The demand for fuel oil is affected by factors such as China-US trade frictions, the replacement of low-sulfur fuel oil in the marine fuel market, and the decline in power generation demand after summer [4]. - The inventory of fuel oil has increased in some regions, and the market structure of high-sulfur fuel oil has strengthened marginally, while that of low-sulfur fuel oil has weakened [5][6]. Summary by Relevant Catalogs Market Performance - This week, the fuel oil futures market declined. The FU main contract fell 5.54%, and the LU main contract dropped 7.13% [1]. Supply High-sulfur Fuel Oil - The Middle East situation has eased, and OPEC's relaxation of production cuts may increase the supply of high-sulfur fuel oil. Middle East's September high-sulfur fuel oil shipments are expected to be 4.41 million tons, and October's are estimated at 3.72 million tons [2]. - Iran's September shipments are expected to be 1.45 million tons, and October's are estimated at 0.57 million tons. The US sanctions on Iran continue to increase the difficulty of its oil trade [2]. - Russia's high-sulfur fuel oil supply decreased in August due to refinery maintenance but rebounded in September. September's shipments are expected to be 2.97 million tons, and October's are estimated at 1.97 million tons [2]. Low-sulfur Fuel Oil - There has been a recent increase in local supply, mainly from Nigeria's temporary increase. Nigeria's September low-sulfur fuel oil shipments are expected to be 0.53 million tons, and October's are estimated at 0.34 million tons [3]. - Kuwait's exports are relatively limited. September's shipments are 0.37 million tons, and October's are expected to be 0.4 million tons [3]. - China's domestic production of low-sulfur fuel oil has been low this year due to poor profitability and refinery maintenance. September's production was 1.075 million tons, a 0.94% increase from the previous month [3]. Demand - China-US trade frictions and potential tariff increases may damage trade and shipping demand, affecting the consumption of marine fuel oil. There may be a short-term increase in exports due to the anticipation of tariffs [4]. - The demand for low-sulfur fuel oil in the marine fuel market is being replaced by new desulfurization towers and cleaner energy sources such as LNG and green methanol [4]. - After the summer, the power generation demand in the Middle East, South Asia, and Egypt will decline, reducing the consumption of high-sulfur fuel oil. However, Egypt's demand may increase due to the decline in domestic natural gas production [4]. - The demand from refineries has shown a marginal increase. China's high-sulfur fuel oil imports in September are expected to be 0.5 million tons, and October's arrivals are estimated at 0.84 million tons [4]. Inventory - This week, Singapore's fuel oil inventory was 25.063 million barrels, a 5.89% increase from the previous week, and Zhoushan Port's inventory was 1.35 million tons, a 21.62% increase [5]. Market Structure High-sulfur Fuel Oil - The market structure has strengthened marginally due to reduced supply pressure, improved refinery demand, and a decrease in domestic futures registered warehouse receipts [5]. - However, the upward momentum may be limited due to the decline in power generation demand after summer, potential increases in Middle East exports, and potential risks in shipping demand [5]. Low-sulfur Fuel Oil - The market structure has weakened recently due to increased local supply and average marine fuel demand [6]. - If the Dangote refinery resumes operation, the supply may decrease. However, if China-US tariff conflicts intensify, the shipping demand will be affected, and the low-sulfur fuel oil market may be more sensitive [6]. - The demand for low-sulfur fuel oil is under continuous downward pressure due to the trend of carbon neutrality in the shipping industry. If the trade risks ease, the downside space may be limited based on its relatively low valuation compared to gasoline and diesel [6].

Group 1: Industry Investment Rating - High-sulfur fuel oil: Short-term neutral, medium-term downward [2] - Low-sulfur fuel oil: Short-term neutral, medium-term downward [2] - Cross-variety: None [2] - Cross-period: Go long the spread of FU2511 - 2512 at low levels (positive spread) [2] - Spot-futures: None [2] - Options: None [2] Group 2: Core Viewpoints - The market structure of high-sulfur fuel oil has strengthened marginally. The main contract of SHFE fuel oil futures closed up 3.7% at 2,860 yuan/ton, and the main contract of INE low-sulfur fuel oil futures closed up 1.26% at 3,387 yuan/ton [1] - The sharp rise in the FU futures was driven by the rebound of crude oil prices after a continuous correction, which boosted energy sector varieties, and the marginal improvement of the fuel oil's fundamentals, including reduced exports from the Middle East, slightly recovered refinery demand, and supply impacts from sanctions on Iran and drone attacks on Russia. The cancellation of all 29,910 tons of warehouse receipts at Dading Warehouse also supported the FU structure [1] - For low-sulfur fuel oil, the market contradictions are relatively limited. The increased exports from Nigeria's Dangote refinery due to the shutdown of its RFCC unit may continue, but the overall supply pressure is limited due to the decline in arbitrage cargoes from the West in September, medium to low domestic production, and the diversion of low-sulfur components by strong gasoline and diesel premiums [1] Group 3: Figures and Data - Figures include Singapore high-sulfur 380 fuel oil spot price, Singapore low-sulfur fuel oil spot price, Singapore high-sulfur fuel oil swap near-month contract, Singapore low-sulfur fuel oil swap near-month contract, Singapore high-sulfur fuel oil near-month spread, Singapore low-sulfur fuel oil near-month spread, fuel oil FU futures main contract closing price, fuel oil FU futures index closing price, fuel oil FU futures near-month contract closing price, fuel oil FU near-month contract spread, fuel oil FU futures main contract trading volume and open interest, fuel oil FU futures total trading volume and open interest, low-sulfur fuel oil LU futures main closing price, low-sulfur fuel oil LU futures index closing price, low-sulfur fuel oil LU futures near-month contract price, low-sulfur fuel oil LU futures near-month spread, low-sulfur fuel oil LU futures main trading volume and open interest, and low-sulfur fuel oil LU futures total trading volume and open interest [3]

Report Summary 1) Report Industry Investment Rating - High - sulfur fuel oil: Oscillation [3] - Low - sulfur fuel oil: Oscillation [3] 2) Core Viewpoints of the Report - The short - term cost of fuel oil is strongly supported by the recent strong crude oil price, but the oil market may face a looser balance sheet in the medium term, and there is still resistance to the upside of oil prices if sanctions expectations are not fulfilled [1] - The high - sulfur fuel oil market is currently weak, with sufficient supply and high inventory. Demand lacks highlights except for power plant peak - season purchases. However, the shrinkage of the East - West spread may tighten arbitrage cargo supply and support the Asia - Pacific market in the short term. Structurally favorable factors may lead to a stronger market if refinery demand recovers significantly [1] - The low - sulfur fuel oil market has limited current benefits. The decline of Singapore diesel cracking may weaken support, and component supply is expected to increase. In the medium term, abundant remaining capacity may lead to increased supply, and the market share may be gradually replaced by the shipping industry's carbon - neutral trend [2] 3) Summary by Related Catalogs Market Analysis - The main contract of SHFE fuel oil futures closed down 0.37% at 2933 yuan/ton, and the main contract of INE low - sulfur fuel oil futures closed down 0.38% at 3676 yuan/ton [1] - The high - sulfur fuel oil market has a weak fundamental situation, with a significant decline in cracking spreads from high levels, sufficient supply, and high inventory. Refinery demand has not shown large - scale improvement, but short - term support may come from reduced arbitrage cargo supply [1] - The low - sulfur fuel oil market has limited positive factors. The decline of Singapore diesel cracking may weaken support, and component supply is expected to increase. The market outlook is not optimistic due to abundant capacity and the carbon - neutral trend [2] Strategy - High - sulfur: Maintain an oscillatory view [3] - Low - sulfur: Maintain an oscillatory view [3] - Cross - variety: Appropriate profit - taking for previous short positions in FU cracking spreads (FU - Brent or FU - SC) [3] - Cross - period: Gradual profit - taking for previous FU reverse arbitrage positions [3] - Spot - futures: No strategy [3] - Options: No strategy [3]

Group 1: Report Industry Investment Rating - No specific industry investment rating is provided in the report. Group 2: Core Views of the Report - The short - term market drivers are limited, and the market shows narrow - range fluctuations. The main contract of SHFE fuel oil futures closed down 0.28% at 2,863 yuan/ton, and the main contract of INE low - sulfur fuel oil futures closed down 1.89% at 3,580 yuan/ton [1]. - Since the OPEC meeting, crude oil prices have shown a volatile and upward trend. 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 recent decline in oil prices also indicates that resistance has emerged after continuous rebounds, driving the market down [1]. - The current market structure of high - sulfur fuel oil is weak, with spot discounts, monthly spreads, and crack spreads continuously declining. Although there are still structural support factors, the crack spreads need to be further adjusted to attract the recovery of refinery demand. After sufficient adjustment, the market will regain support [1]. - The market structure of low - sulfur fuel oil has been stable recently. The strong performance of overseas diesel provides some support, and the domestic production in the first half of the year decreased significantly year - on - year, resulting in limited overall supply pressure. However, the remaining production capacity is abundant, and the carbon - neutral trend in the shipping industry in the long - term will gradually replace the market share of low - sulfur fuel oil, suppressing the market outlook [1]. - Currently, the market structure of low - sulfur fuel oil is slightly stronger than that of high - sulfur fuel oil. The price spread between high - and low - sulfur fuel oil has been widening recently, but the structural contradiction has not been completely reversed, and there is no room for a significant increase in the spread [2]. Group 3: Strategies - High - sulfur fuel oil: The market is expected to be volatile [3]. - Low - sulfur fuel oil: The market is expected to be volatile [3]. - Cross - variety: Short the FU crack spread (FU - Brent or FU - SC) on rallies [3]. - Cross - period: Gradually take profit on the previous FU reverse spread positions [3]. - Spot - futures: No strategy [3]. - Options: No strategy [3].

Report Summary 1) Report Industry Investment Rating - High-sulfur fuel oil: Sideways [3] - Low-sulfur fuel oil: Sideways [3] 2) Core Viewpoints - After the OPEC meeting's production increase was confirmed, crude oil prices remained firm, and the spot fundamentals were decent. The market expected that OPEC's actual production increase would be far less than the quota. With demand in the peak season, the pressure from new supply was limited. Thus, the unilateral prices of FU and LU were supported by the cost side, and there was limited downside in the short term [1]. - The high-sulfur fuel oil market structure was weak recently, with spot discounts, monthly spreads, and crack spreads declining, indicating relatively abundant spot supply. The demand for high-sulfur fuel oil might decline year-on-year, and Middle Eastern high-sulfur fuel oil shipments had increased significantly. The high-sulfur fuel oil crack spread might need further adjustment to attract incremental demand, and the market structure would find new support after full adjustment [1]. - In the short term, the supply pressure of low-sulfur fuel oil was limited, but there was no shortage expectation. From June, domestic low-sulfur fuel oil production might gradually recover from a low level, and Brazil's supply to the Asia-Pacific region had also increased. In the medium term, the carbon neutrality trend in the shipping industry would gradually replace the market share of low-sulfur fuel oil. Overall, the low-sulfur fuel oil market lacked a continuous upward driver [2]. - Currently, the market structure of low-sulfur fuel oil was slightly stronger than that of high-sulfur fuel oil, but the structural contradiction had not completely reversed, and there was no room for a significant increase in the high-low sulfur spread [2]. 3) Strategy Summary - **Cross-variety**: Short the FU crack spread (FU-Brent or FU-SC) on rallies [3] - **Cross-period**: Short the FU2509 - FU2510 spread on rallies [3] - **Futures-spot**: None [3] - **Options**: None [3] 4) Market Data Charts - Charts related to Singapore high-sulfur and low-sulfur fuel oil spot prices, swap near-month contracts, and near-month spreads, as well as domestic fuel oil FU and low-sulfur fuel oil LU futures contract closing prices, index closing prices, near-month contract prices, near-month spreads, and trading volume and open interest are provided [4]