Heating oil demand is expected to weaken Fuel oil is expected to remain weak

High and low sulfur fuel oil market review

Futures market: the price of low and high sulfur fuel oil was mainly sorted out in overnight trading, and the LU2303 contract fell 52 yuan / ton, or 1.
37%, to close at 3754 yuan / ton; The FU2305 contract fell 15 yuan/ton, or 0.
36%, to close at 2505 yuan/ton.

【Important Information】

Crude oil cost side: From the perspective of the overall supply and demand fundamentals, the recently released EIA data shows that due to events such as snowstorms, the refinery operating rate has fallen sharply, and as refinery capacity gradually recovers, the operating rate and oil production are expected to gradually recover
.
Nigeria's recent sharp increase in crude oil production, on the demand side, the expected better weather in the United States in January, the expectation of heating oil demand fell sharply, which greatly reduced the expectation of oil demand season, while the Federal Reserve continued to release hawkish comments, dragged down by macroeconomic recession expectations, crude oil prices returned to the downward channel
.

Fuel oil supply and demand: In the week ended January 4, Singapore's fuel inventories increased by 391,000 barrels, reaching a two-week high of 21.
333 million barrels, and Singapore's light, distillate and fuel oil were all in the accumulation situation, representing the marginal surplus of oil supply and demand, while the release of domestic refinery production data in November, domestic refinery diesel production continued to be high, high-sulfur production continued to decline, and the continuous marginal reduction of the previous supply side brought about a rebound in high-sulfur fuel oil prices and a stronger
cracking spread 。 With valuations restored to reasonable levels after the low pyrolysis spread of high-sulfur fuel oil, Russian fuel oil is still supplying the Asian market, and high-sulfur fuel oil prices are expected to follow or weaken crude oil
.

【Arbitrage Strategy】

With the expected improvement of weather in Europe and the United States, the marginal weakening of heating oil demand is expected, and the macroeconomic recession is more sensitive to the terminal shipping market, thereby suppressing marine oil demand from the demand side.

【Trading Strategy】

Under the main logic of macroeconomic recession expectations, crude oil returned to the downward channel along the downward trend, and in the short term, the previous blizzard event drive came to an end, and under the pressure of warmer weather in Europe and the United States, oil products are expected to continue to remain weak, and it is recommended that short positions participate in the light band market
.

Risk concern: Crude oil prices rose sharply