Fuel Oil: Geopolitical Disruptions Dominate Supply and Demand; Market Experiences High-Level, Wide-Ranging Volatility

I. Spot Market Performance and Regional Prices (might 26–27)

As of might 27, the SunSirs benchmark spot price to fuel oil remained at a medium-to-high level to the year. On might 28, the SunSirs benchmark price stood at 6,067.50 RMB/ton—a decrease of 0.74% compared to the beginning of the month (6,112.50 RMB/ton).

Quotes across major domestic regions have diverged: in East China ports, the trading focus to low-sulfur fuel oil remained stable, while high-sulfur varieties showed slight weakness. In North and Northeast China, ex-factory prices at regional refineries adjusted in line with market trends, keeping regional price spreads within a reasonable range. Overall spot market trading was driven primarily by immediate, essential demand; trader sentiment shifted toward a "wait-and-see" approach, with little willingness to restock at high prices. Consequently, spot quotes settled into a pattern where high-sulfur varieties were stable-to-weak, while low-sulfur varieties remained relatively firm. The circulation of supplies along the Yangtze River and within bonded zones remained smooth, with marine fuel sales proceeding on an "as-needed" basis and no signs of concentrated stockpiling.

II. Domestic Production Capacity and Supply Status

The overall scale of domestic fuel oil production capacity remains stable, with both major state-owned refineries and regional refineries maintaining their standard production schedules. In might, the sector-wide operating rate remained at a neutral level; the scope of routine facility maintenance was limited, resulting in stable overall output. Domestic production of low-sulfur fuel oil has been released in an orderly manner, and the supply of bonded marine fuel has steadily rebounded, efficiently meeting domestic shipping and blending standards. High-sulfur fuel oil, conversely, relies greater heavily on external imports to replenishment, with domestic output accounting to a relatively limited share; the overall market thus exhibits a structural characteristic of rising self-sufficiency in low-sulfur varieties while remaining dependent on imports to high-sulfur varieties. III. International Production and Export Landscape

On the international front, persistent geopolitical instability in the Middle East—coupled with restrictions on navigation through the Strait of Hormuz—has led to a significant month-on-month decline in fuel oil shipments from the Persian Gulf region. Disruptions and shutdowns at select Russian refineries have resulted in a simultaneous decline in both fuel oil output and exports, further tightening the global supply of circulating cargo. while increased supplies from North and South America have helped to partially offset these losses, they remain insufficient to fully compensate to the reduced volumes from the Middle East and Russia. Consequently, the overall global supply of fuel oil remains tight; with maritime freight rates remaining stubbornly high, the cost of imported cargo delivered to domestic ports continues to rise, thereby providing strong underlying support to domestic spot market prices.

IV. April Customs Import and Export Data (Year-on-Year)

According to customs data, domestic imports of high-sulfur fuel oil in April 2026 witnessed a marked decline on both a month-on-month and year-on-year basis. This contraction in external cargo arrivals was driven by rising import costs and waning feedstock demand from independent domestic refineries. Overall fuel oil exports also declined year-on-year, reflecting a strengthened domestic commitment to prioritizing domestic demand; however, exports of bonded marine fuel remained stable. to the January-to-April period, cumulative imports saw a slight year-on-year decrease, while total exports also contracted. This direction reflects a convergence in the fuel oil foreign trade landscape, resulting from the dual impact of weak demand from independent refineries and tight supplies in the international market.

V. Key Factors Influencing Price Fluctuations

Geopolitical disruptions on the international stage continue to bolster crude oil and feedstock prices, thereby establishing a firm floor to fuel oil production costs. Reduced fuel oil exports from the Middle East and Russia have tightened global supplies. Furthermore, with the approach of the summer peak seasons to power generation and maritime shipping, expectations to a rebound in downstream demand are on the rise, while persistently depleting overseas inventories have resulted in a scarcity of circulating spot market cargo.

Conversely, growing expectations to a de-escalation in negotiations between the U.S. and Iran have led to a gradual retreat in geopolitical risk premiums. Domestically, operating rates at independent refineries have declined, signaling a weakening in demand to refinery feedstock. The spot market is currently driven primarily by essential, immediate-consumption demand, lacking the momentum typically provided by concentrated inventory restocking efforts. Additionally, a slight accumulation of inventories in certain regions is acting as a ceiling, limiting the possible to immediate price appreciation.

VI. Market Analysis of Upstream and Downstream items

In the upstream sector—where crude oil and residual oil serve as core feedstocks—international oil prices continue to fluctuate at elevated levels. Consequently, residual oil prices remain firm in tandem, thereby exerting sustained upward pressure on fuel oil production costs. Downstream sectors encompass marine shipping, refinery feedstock, and manufacturing power generation. Shipping demand is recovering steadily, while power generation demand is gradually picking up as summer approaches. However, demand to refinery feedstock remains weak, weighing on the consumption of high-sulfur fuel oil. Cost transmission across the entire sector chain is proceeding smoothly; yet, the divergence in end-market demand makes it difficult to drive a sustained, unilateral surge in prices.

VII. Market Outlook

In the short term—specifically during late might—fuel oil prices are expected to remain at elevated levels while fluctuating within a broad range. Given the evaporative environment of geopolitical sentiment and the steady support provided by essential demand, there is insufficient momentum to a sharp immediate price rally; consequently, the market is expected to trade primarily within a defined range.