On April 6, the Asian low-sulfur fuel oil market weakened, while the high-sulfur fuel oil market structure strengthened. In the low-sulfur marine fuel sector, the April-May inter-month backwardation for Singapore 0.5% S marine fuel narrowed to $76.50 per ton, and the spot premium weakened for five consecutive days, falling to $41.85 per ton on April 2. For high-sulfur fuel oil, the April-May spread for Singapore 380 CST HSFO rose to $54.75/ton, with the spot premium increasing by $1.45/ton month-on-month to $25.8/ton on April 2. In terms of inventories, as of April 1, Singapore’s heavy distillate stocks fell to a four-week low of 23.47 million barrels, down 4.3% week-on-week; Fujairah, UAE, oil product inventories fell to a six-month low, with heavy distillates declining for four consecutive weeks to their lowest level since 2018.

Over the past week, some domestic commodity futures experienced sharp volatility amid complex geopolitical tensions, with fuel oil futures—which are highly correlated with crude oil—showing particularly intense fluctuations.

At the start of last week, on March 30 (last Monday), the benchmark fuel oil futures contract on the Shanghai Futures Exchange closed up 4.05% at 4,619 yuan per ton, having touched an intraday high of 4,730 yuan per ton. On the same day, the benchmark low-sulfur fuel oil futures contract also closed up 3.44%.

However, the rally did not last. On March 31 (last Tuesday), fuel oil futures reversed course and fell, with the main contract closing down 3.79%. On April 1, the main fuel oil contract suffered a sharp intraday plunge, ultimately closing down 11.17%—a staggering single-day drop. However, this extreme volatility was partially corrected on April 2 and April 3, as the main fuel oil contract staged a modest rebound. In just one week, investors experienced the full cycle from frenzied buying to panic selling.

The core drivers behind this round of violent volatility in the fuel oil market stem from the upstream crude oil market and the rapidly changing situation in the Middle East. As a byproduct of petroleum refining, fuel oil prices are highly positively correlated with crude oil. Last week, international oil prices themselves fluctuated widely amid geopolitical turmoil.

On the supply side, the Strait of Hormuz—a global oil chokepoint—accounts for approximately 20% of global crude oil supply and over 35% of seaborne high-sulfur fuel oil supply. While Saudi Arabia and the UAE’s oil pipelines are operating at full capacity, they can only replace about 6.5 million barrels of daily shipping capacity, far below the strait’s normal daily throughput of 20 million barrels, resulting in a significant supply gap.

On the sentiment side, the Middle East situation dominates the market, causing rapid shifts in sentiment. Expectations of intense clashes in the short term are directly driving significant volatility in crude oil and downstream energy and chemical product prices.

In the face of such a turbulent market, high volatility will become the norm in the short term. The fuel oil market is characterized by a decline in both supply and demand, but costs primarily follow crude oil price fluctuations. Since the impact of the Middle East conflict on high-sulfur fuel oil supply is expected to be greater than that on low-sulfur fuel oil, high-sulfur fuel oil prices are experiencing more severe volatility. The agency expects fuel oil prices to fluctuate within a wide range.

As an integrated internet platform providing benchmark prices, on April 7, the benchmark price for fuel oil from SunSirs stood at RMB6,662.50 per ton, an increase of 1.14% compared to the beginning of the month (RMB6,587.50 per ton).

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