Market analysis reveals that the main Shanghai fuel oil futures contract closed up 1.57% overnight at 2,978 yuan per ton. The main INE low-sulfur fuel oil futures contract also closed higher, gaining 1.54% to settle at 3,830 yuan per ton overnight.

Tensions in the Middle East have escalated once more, with Iran firing on a merchant vessel and the United States launching a strike against Iran. According to a July 7th announcement from the U.S. Treasury's Office of Foreign Assets Control, the U.S. has revoked a general license that had authorized the sale of Iranian oil. Related winding-down transactions will be permitted until 00:00 Eastern Time on July 17th. The previous decline in crude oil and fuel oil prices was partly due to market expectations of a relaxation in U.S. sanctions against Iran. If these sanctions are reinstated, the market is poised for a broad-based rebound. It is crucial to monitor the ongoing developments in this situation closely.

Strategy

For high-sulfur fuel oil: Neutral stance advised, with attention on developments in the Iran situation.

For low-sulfur fuel oil: Neutral stance advised, with attention on developments in the Iran situation.

Cross-commodity strategy: None.

Calendar spread strategy: None.

Basis trade strategy: None.

Options strategy: None.

Risk Factors

Key risks include geopolitical conflicts, macroeconomic risks, tariff risks, sanctions risks, significant fluctuations in crude oil prices, stronger-than-expected power generation demand, OPEC+ production increases falling short of expectations, and stronger-than-expected bunkering fuel demand.