Fuel Oil Monthly Report: Staggering to an end, the future can be expected

LU low-sulfur fuel oil: The first batch of refined oil and low-sulfur fuel oil export quotas in 2023 was recently released, and the first batch of refined oil export quotas totaled 18.
99 million tons, up 46.
08% year-on-year; The first batch of low-sulfur fuel oil export quotas totaled 8 million tons, an increase of 1.
5 million tons or 23.
08%
year-on-year.
Combined with the sharp decline in international oil prices on the cost side, Resonance has put great downward pressure
on low-sulfur fuel oil.
At present, the low-sulfur fuel oil drive mainly comes from the change expectations of diesel and gasoline: foreign recession expectations continue to suppress diesel demand, at the same time, the time limit for European sanctions on Russian refined oil products on February 5, 2023 is approaching, and the current supply of refined oil products in Russia based on diesel and gasoline is in the stage of "rushing" easing; The approach to the Spring Festival in China and the impact of the spread of the epidemic in early 2023 have weakened demand for diesel and gasoline
.
In the short term, there is no significant increase in demand for refined oil products at home and abroad, which puts pressure
on the fundamentals of low-sulfur fuel oil.
So far, the volume of fuel tankers from the Middle East to Asia reached a three-month high of 1.
56 million tons in December, up significantly from 830,000 tons in November
.
Fuel oil from Kuwait is 230,000 tonnes, much of which is contributed by Kuwait's new Al-Zour refinery, up from around
20,000 tonnes in September.
After the refinery is fully commissioned (expected in February 2023), its low-sulfur fuel oil production is expected to be 10-12 million tons per year, which is close to the time point of European sanctions on Russian refined oil products, and the market is less worried about the supply of low-sulfur fuel oil
.

FU fuel oil: Fundamentally, high sulfur fuel oil as a whole is still in excess due to changes in trade flows in Asia: Russian shipments have recently declined slightly, but there are no signs of substantial production
cuts.
Since the beginning of this month, Singapore's high-sulfur oil cracking spread has rebounded from the bottom area to a certain extent, on the one hand, the recent decline in crude oil prices is too large, and high-sulfur fuel oil has relatively little elasticity due to its low absolute price; On the other hand, the "low price" advantage of fuel oil has also attracted incremental demand from refineries and ships, especially for deep processing margins in Asia, and refinery procurement is expected to remain strong
.
At present, the performance of high sulfur is affected by the actual supply, and it is difficult to have a more obvious valuation repair
.
It may be necessary to see an inflection point after February 5, 2023, when the decline in Russian high-sulphur supply will lead to a reduction in supply pressures in the Asia-Pacific region, and there will be greater certainty of an improvement in high-sulfur fundamentals
.