Report Summary 1. Report Industry Investment Rating No specific industry investment rating is provided in the report. 2. Core Viewpoints - The market has returned to the fundamental - driven logic, and the volatility of the fuel oil market has decreased significantly. Both high - sulfur (FU) and low - sulfur (LU) fuel oil are in a narrow - range oscillation state [1]. - For high - sulfur fuel oil, the supply is relatively abundant, and the demand from power generation terminals may decline year - on - year due to OPEC's production increase. However, after the market structure adjustment, it will gain new support [2]. - For low - sulfur fuel oil, the short - term supply pressure is limited, but in the medium term, the market share will be gradually replaced by the carbon - neutral trend in the shipping industry. The market lacks a continuous upward - driving force [3]. - The current market driving force of low - sulfur fuel oil is stronger than that of high - sulfur fuel oil, and the structural contradiction still exists. The high - low sulfur price difference does not have the space for a significant increase for the time being [3]. 3. Summary by Related Content Market Analysis - The main contract of SHFE fuel oil futures closed down 1.01% at 2,987 yuan/ton, and the main contract of INE low - sulfur fuel oil futures closed down 0.47% at 3,619 yuan/ton [1]. - With the easing of the Middle - East situation, the oil premium caused by geopolitical conflicts has rapidly declined, driving down the energy sector. The market is now fundamentally driven, and the volatility has decreased [1]. High - Sulfur Fuel Oil Market - The spread structure of high - sulfur fuel oil has weakened recently, with spot discounts, monthly spreads, and crack spreads declining, indicating sufficient supply and lack of positive drivers [2]. - OPEC decided to increase production by 548,000 barrels per day in August, accelerating from 414,000 barrels per day from May to July. The demand for high - sulfur fuel oil in power generation terminals may decline year - on - year [2]. - The crack spread of high - sulfur fuel oil may need further adjustment to attract incremental demand. The increase in the consumption tax deduction ratio of some domestic refineries is beneficial to the recovery of high - sulfur fuel oil import demand [2]. Low - Sulfur Fuel Oil Market - In the short term, the supply pressure of low - sulfur fuel oil is limited, and the market structure is relatively strong. The supply of arbitrage cargoes from the Western region is low, and domestic production is at a low level. The significant increase in bunker sales in May in Singapore, Zhoushan, and Shanghai supports the market [3]. - In the medium term, the carbon - neutral trend in the shipping industry will gradually replace the market share of low - sulfur fuel oil. After the end of the domestic refinery maintenance season, domestic production is expected to increase [3]. Strategies - High - sulfur fuel oil: Oscillation [4]. - Low - sulfur fuel oil: Oscillation [4]. - Cross - variety: Short the FU crack spread (FU - Brent or FU - SC) on rallies [4]. - Cross - period: Short the FU2509 - FU2510 spread on rallies [4]. - Spot - futures: None [4]. - Options: None [4].

Core Viewpoint - The geopolitical tensions in the Middle East have led to significant fluctuations in international oil prices, with Brent crude oil prices reaching as high as $76 per barrel before experiencing a sharp decline to $70.45 per barrel [1][2]. Group 1: Oil Price Movements - Brent crude oil prices experienced a peak of $76 per barrel, followed by a drop to $70.45 per barrel, reflecting a daily decline of 3.5% [1]. - Analysts suggest that the price of high-sulfur fuel oil is closely tied to crude oil prices, with a notable increase of 3.38% to 3276 yuan per ton [1][4]. - Morgan Stanley predicts that if regional conflicts escalate, oil prices could rise to $120 per barrel, while Goldman Sachs holds a contrary view, expecting prices to drop to $55 per barrel by Q4 2025 [3]. Group 2: Geopolitical Influences - The conflict between Israel and Iran has intensified, with Israel conducting airstrikes on Iranian nuclear facilities, prompting retaliatory actions from Iran [2]. - Turkish President Erdogan emphasized the need for diplomatic solutions to the escalating violence, which poses risks to regional security [2]. - Analysts indicate that ongoing tensions in the Middle East will likely keep oil prices elevated due to supply risks [2]. Group 3: Supply Chain Dynamics - The Middle East accounts for approximately one-third of global high-sulfur fuel oil exports, making it vulnerable to supply disruptions due to geopolitical conflicts [5]. - Iranian high-sulfur fuel oil shipments have decreased significantly due to U.S. sanctions, with May shipments reported at 900,000 tons, down 100,000 tons from the previous month [5]. - Russian high-sulfur fuel oil exports also faced a decline, with May shipments estimated at 2.2 million tons, a decrease of 200,000 tons from the previous month [5]. Group 4: Seasonal Demand Trends - Summer is a peak demand season for high-sulfur fuel oil, particularly in regions like the Middle East and South Asia, with Saudi Arabia's imports expected to rise [6]. - Egypt has increased its demand for high-sulfur fuel oil due to natural gas shortages, with June imports projected at 650,000 tons, an increase of 80,000 tons from the previous month [6]. - The demand for high-sulfur fuel oil may continue to grow, although OPEC+ production increases could impact this trend [6]. Group 5: Market Outlook - The volatility in international oil prices is expected to continue, influenced by geopolitical factors and supply-demand dynamics [7]. - Analysts recommend market participants to be cautious and consider hedging strategies to mitigate risks associated with price fluctuations [7]. - If Brent crude oil prices exceed $80 per barrel, high-sulfur fuel oil prices could rise above $510 per ton [8].