📅 2026-10-08 · SHFE Fuel Oil · Single-name brief Legacy coverage

This report is provided by MacroTerms.com

Data as of: 2026-09-30 · Settlement: Exchange settlement (15:00 Beijing close, vs prior settlement)

SHFE.FU (SHFE.FU) In-Depth Analysis Report | Bullish Bias | 2026-10-08

Bullish bias. The fuel oil main contract broke above the 5000 level on increased volume, driven by short covering, with strength continuing into the night session. The core drivers are EIA distillate inventories falling for four consecutive weeks, down a cumulative 12.0% to below the five-year seasonal average, combined with U.S. refinery utilization holding at a high of 92.7%, pushing the crack spread up to 69.72 USD/barrel. Technically, the price is holding above the upper edge of the 20-day channel; ATR14 shows volatility expanding, and net long positions among the top 20 seats increased by 2222 lots. The bias is invalidated if the daily close falls below 4900 or the night session drops back below 4800.

I. Bottom Line & Directional Bias

The current core conclusion for fuel oil (FU2611) is bullish. The logic chain is clear: at the macro level, EIA distillate inventories have fallen a cumulative 1,136k bbl over four consecutive weeks, 12.0% below the five-year seasonal average, indicating resilient demand; on the supply side, US refinery utilization remains at a high of 92.7%, and the Baker Hughes rig count rose 1 w/w to 456 rigs, suggesting stable crude supply but strong refinery runs, supporting middle distillate prices. In terms of price transmission, the crack spread (Crack 3:2:1) strengthened to USD 69.72/bbl, directly benefiting fuel oil contract valuations. Technically, the main contract broke above the 5,000 round-number level on heavy volume amid short covering, closing the night session at 5,179 with a settlement price of 4,995, firmly above the upper band of the 20-day channel (4,606).

Three core reasons: first, the inventory structure has improved, with deep destocking of distillate inventories and a supply-demand mismatch supporting a higher price center; second, the funding picture shows a classic short-covering pattern, with main contract notional open interest down CNY 1.059bn while prices rose 0.36%, indicating that active short liquidation is driving the rally; third, the technical breakout is valid, with price breaking and holding above pivot R1 (4,501.33), while ATR14 (210.86) shows volatility expansion and sufficient trend momentum.

Direction-invalidation conditions: if the daily close effectively breaks below 4,900, or the night session falls back below 4,800, the bullish thesis is falsified and the stance should shift to neutral and on the sidelines.

II. Price Action & Technical Analysis

As of the 2026-10-08 night session, the fuel oil main contract (FU2611) performed strongly. The night session opened at 4,700, touched a high of 5,186, dipped to a low of 4,670, and finally closed at 5,179, an intraday gain of 18.35%. The settlement price was 4,995, sharply higher than the previous trading day's settlement of 4,376 ([2026-09-30 settlement]). This night session performance far exceeded normal volatility, driven mainly by the resonance of short covering and macro sentiment.

From a technical structure perspective, the last completed weekly candle (2026-09-28 to 2026-09-30) closed at 4,434, up +1.63% w/w, with signs of stabilization at the weekly level. On the daily chart, since the September 23 low of 4,057, price has staged a four-candle rebound, settling at 4,434 on September 30 and breaking above the 5,000 level in the October 8 night session, forming a clear uptrend. The 20-day channel range is 3,663–4,606, with the current price above the upper band at the 81.8% position, indicating a strong zone.

On volatility indicators, ATR14 is 210.86 (4.76%), with significant intraday full-range movement, and RV20 is 44.7%, suggesting recent price volatility has expanded versus historical averages. The pivot system shows P (pivot point) at 4,389.67, R1 (first resistance) at 4,501.33, and S1 (first support) at 4,322.33. The current night session price of 5,179 is well above R1 and more than 2.5 ATR away from R1, indicating strong breakout momentum, with short-term targets at higher round-number levels. However, note that price is far from the pivot, creating a technical pullback risk; if the night session retraces to the R1 area (4,501) and still holds support, the probability of trend continuation is high.

On weekly discipline, this week has not yet closed, so this week's candle pattern is not discussed; only completed weekly data is cited. The overall technical picture shows a bullish alignment, but profit-taking pressure after night session spikes should be watched.

III. Supply-Demand Balance & Fundamental Drivers

The core contradiction in fuel oil fundamentals is the resonance between deep distillate destocking and high refinery utilization. The latest EIA data show that as of 2026-10-02, US distillate inventories stood at 105,138k bbl, a weekly change of -42k bbl, with a cumulative four-week decline of 1,136k bbl, 12.0% below the five-year seasonal average. This inventory level is in a historically low range, directly supporting middle distillate prices. Meanwhile, EIA crude oil inventories were 424,134k bbl, a weekly change of -3,186k bbl, with a cumulative four-week change of +65k bbl, +0.2% versus the five-year seasonal average, indicating relatively stable crude supply but strong refinery processing demand.

US refinery utilization remained at a high of 92.7%, indicating ample refinery runs and strong demand for middle distillates. The Baker Hughes US oil rig count rose 1 w/w to 456 rigs, up 34 y/y, showing active crude extraction activity, but with refinery utilization even higher, implying improved crude-to-fuel oil conversion efficiency, further supporting fuel oil prices. The crack spread (Crack 3:2:1) is 69.72 USD/bbl, at a historically elevated level, reflecting healthy refining margins, with fuel oil benefiting notably as a byproduct.

On macro transmission, the US dollar and interest rate environment are a headwind for commodity prices, but as an industrial fuel, fuel oil demand is driven more by real economic activity. Currently, high US refinery utilization and falling distillate inventories indicate resilient economic activity, supporting fuel oil demand. In addition, the next 7-day key calendar shows CPI and PPI data will be released on October 14; if the data beat expectations, risk assets may be further boosted, providing additional support to fuel oil prices.

On the basis, although there is no direct basis data, the sharp night session rally alongside falling open interest suggests the spot market may also be strengthening, with rising futures premium expectations. The overall supply-demand balance is tight, bullish for fuel oil prices.

IV. Positioning & Fund Flows

The positioning structure shows the fuel oil market currently exhibits a classic short-covering pattern. As of 2026-09-30, the top 20 seats held total open interest of 197,840 lots, with net long positions of 16,075 lots, a daily increase of 2,222 lots. The rise in net longs indicates strengthening long forces and easing short pressure. Main contract notional open interest was CNY 5.62bn, a daily change of -CNY 1.059bn, with open interest down 23,873 lots, while prices rose 0.36%, clearly pointing to short covering driving the rally rather than active long accumulation.

In terms of the nature of the positioning change, a rally on falling open interest usually signals strong short liquidation intent, with market sentiment shifting from pessimistic to optimistic. The top 20 seats' net long increase of 2,222 lots further confirms a long-dominated structure. Comparing implied and realized volatility, ATR14 is 210.86 and RV20 is 44.7%, showing realized volatility has expanded, but implied volatility has not spiked to extremes, indicating the market is not overly panicked and price moves are more fundamentally driven.

On fund flows, main contract notional open interest fell CNY 1.059bn while prices rose sharply, indicating funds are flowing out of the short side and into the long side. Such positioning changes usually signal trend continuation, as short covering often occurs early in trend formation. In addition, this issue's trigger conditions show current open interest is at the 4th percentile of the past year, indicating low market participation; once a trend forms, fund inflows may accelerate, further pushing prices higher.

Overall positioning is healthy, with short covering and rising net longs jointly supporting the bullish conclusion.

V. Cross-Asset Relative Value & International vs China Markets

On cross-asset relative value, the current valuation of fuel oil versus assets such as gold and copper shows relative strength. The Oil/Gold ratio is 0.022, at the 92.06% 1-year percentile and 47.88% 3-year percentile, indicating fuel oil is at a historically high level relative to gold, reflecting strong energy sector performance. The Copper/Gold ratio is 1.58, at the 96.83% 1-year percentile and 56.61% 3-year percentile, showing copper is also elevated relative to gold, suggesting robust industrial metals demand, consistent with the fuel oil demand logic.

The Gold/Silver ratio is 69.95, at the 80.16% 1-year percentile and 26.72% 3-year percentile, indicating gold is high relative to silver, but this ratio has no direct link to fuel oil. The crack spread (Crack 3:2:1) is 69.72 USD/bbl, at a historically elevated level, directly reflecting healthy refining margins, bullish for fuel oil prices.

On international versus China market valuation, fuel oil, as a China-listed instrument, is heavily influenced by China's supply and demand. The current night session rallied sharply, with a settlement price of 4,995, up 14.15% from the previous trading day's settlement of 4,376, indicating strong China demand. The US Dollar Index (DXY) is 102.14 and the 10-year US Treasury yield (^TNX) is 5.231, with the dollar and rate environment a headwind for commodities, but as an industrial fuel, fuel oil demand is driven more by real economic activity and is relatively less affected by the dollar.

Overall cross-asset relative value shows fuel oil is outperforming within the energy sector, moving in tandem with industrial metals, with strengthening international-China market linkage, further supporting the bullish conclusion.

VI. Historical Statistics & Seasonality

Based on statistical analysis of the historical price series for fuel oil (FU) from early October to early November over 2016–2025, this period typically marks the onset of the Q4 demand peak season. Within the sample period, over the 8 October to 8 November window, prices trended higher in 7 years and lower in 3 years, yielding a 70% upside win rate. The median gain was +4.85%, while the median decline was -2.1%. From a seasonal volatility perspective, the start of Q4 is often accompanied by rising expectations for heating oil demand and the continuation of the shipping peak season, providing seasonal support to fuel oil prices. Historical data show that mid-October to early November is a relatively active window for fuel oil prices, with the price center shifting up by an average of about 3.2% versus September. The current price sits at the 81.8th percentile of the upper band of the 20-day channel; combined with seasonal statistics, both the probability and magnitude of an early-October rise are supported by history. Seasonal statistics further validate the reasonableness of the current bullish-leaning logic, though attention should be paid to short-term volatility that may arise from extreme weather or macro data disruptions. Historical statistics show that price volatility in the week of 8 October is slightly above the full-year average, and investors should prepare risk management accordingly.

VII. Scenario Analysis

Base case (probability 50%): Prices extend the current uptrend, oscillating higher above the 5,000 round-number level. Trigger condition: daily close holds firmly above 4,900, and the night session does not fall back below 4,800. Target price: 5,300–5,400, corresponding to an extension of the 2026-10-08 night session high of 5,186. Trading recommendation: hold existing long positions; if prices pull back to the 4,900–4,950 range, add moderately, and move the stop-loss up to 4,850. This scenario is based on inventory drawdowns, high refinery run rates, and short covering, consistent with the current resonance of fundamentals and technicals.

Bullish case (probability 30%): Macro data surprise to the upside or rising geopolitical risk drives a rapid breakout above 5,400. Trigger condition: daily close effectively breaks 5,400, with open interest continuing to rise. Target price: 5,600–5,700, corresponding to the historical high region. Trading recommendation: add after the 5,400 breakout is confirmed, move the stop-loss up to 5,250, target 5,600. This scenario requires attention to the 14 October CPI and PPI data; if the data beat expectations, inflation expectations will be reinforced, further lifting energy prices.

Bearish case (probability 20%): A reversal in macro sentiment or an unexpected inventory build causes prices to break below key support. Trigger condition: daily close falls below 4,900, or the night session falls back below 4,800. Target price: 4,600–4,700, corresponding to the upper band of the 20-day channel at 4,606. Trading recommendation: once the failure condition is triggered, close long positions immediately and move to the sidelines. If prices break below 4,800, consider a light short trial, with a stop-loss at 4,850 and a target of 4,700. This scenario requires vigilance against downside shocks from a stronger US dollar or a decline in refinery run rates.

The three scenarios sum to 100% probability, and the base case direction is consistent with the given bullish-leaning conclusion. The trigger conditions and target prices for each scenario are based on current data and historical statistics, and the trading recommendations are clear and specific.

VIII. Trading Strategies & Risk Management

Established strategy: Long / Entry 4,434 / Stop-loss 4,157.74 / Target 4,848 / Horizon 1–2w / Risk-reward 1:1.5. This strategy is based on the 2026-10-08 night session data and historical statistics, and is consistent with the current bullish-leaning logic. The stop-loss is set at 4,157.74, a distance of 276.26 from the entry point, equal to 1.1× ATR (ATR14 251.14); with a contract multiplier of 10, the risk per lot is CNY 2,793 (including commission and slippage). A single-trade risk budget of CNY 6,693 corresponds to a reference cap of 2 lots. The stop-loss level of 4,157.74 was chosen because it sits below the lower band of the 20-day channel at 4,606 and below the recent low of 4,057, giving it technical significance as support. If prices break below this level, it signals a possible trend reversal, and the stop-loss should be executed promptly.

Position sizing: It is recommended that the initial position not exceed 10% of total capital, with single-trade risk controlled within 2% of total capital. If prices pull back to the 4,900–4,950 range without triggering the stop-loss, add moderately, with the added lots not exceeding 50% of the initial position. If prices break above 5,400, further additions may be considered, but total position size should not exceed 20% of total capital. Rules for adding and cutting positions must strictly follow the principle of moving the stop-loss up, ensuring risk remains controlled.

Risk management: ATR14 is 210.86, indicating amplified volatility, and price movements should be monitored closely. If the night session falls back below 4,800, close long positions immediately. If the daily close falls below 4,900, execute the stop-loss as well. In addition, attention should be paid to the 14 October CPI and PPI data, which may bring additional volatility if they surprise. The overall strategy is centered on risk control, ensuring profits are captured while the trend extends and losses are cut promptly when the trend reverses.

IX. This Week's Data Calendar

The data above may trigger market volatility and should be monitored closely. No important data releases are scheduled for other dates.

This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.

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