CITIC Futures: Low-Sulfur Fuel Oil Follows Crude Oil Decline

K-LinePoet · 2026-03-26T04:05:40+00:00

Low-sulfur fuel oil declined following the pullback of crude oil from elevated levels, with market attention focused on geopolitical developments. Despite facing falling demand and substitution pressures, the low-sulfur fuel oil crack spread strengthened. Export tax rebates and quota impacts remain minimal, and high profit margins are expected to drive increased production.

K-LinePoet

2026-03-26 04:05:40

Abstract generation in progress

Low sulfur fuel follows crude oil prices, which have retreated from recent highs. Currently, the market is focused on geopolitical developments; low sulfur fuel has strong core product attributes. During this round of oil price increases, the valuation of low sulfur fuel has significantly recovered compared to crude oil and asphalt, with profits greatly revised upward. A positive diesel-gasoline price spread may indicate that low sulfur fuel is following gasoline fluctuations.

Low sulfur fuel faces bearish factors such as declining shipping demand, competition from green energy, and substitutes for high sulfur fuel. After a sharp increase in the cracking spread, the low sulfur fuel- asphalt spread has returned to high levels, with valuations remaining neutral to slightly high. Its core product attributes cause the cracking spread of low sulfur fuel to strengthen during crude oil rises.

On the fundamentals side, low sulfur fuel export rebate rates are more advantageous than those for refined oil products, and export quotas have little impact. The expectation of high profits may drive increased production of low sulfur fuel. (CITIC Futures)

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