CITIC Futures: U.S.-Iran Conflict Erupts, Leading to a Sharp Rise in Fuel Geopolitical Premium

The outbreak of US-Iran conflict, high oil import dependence, and strong geopolitical factors are driving a sharp increase in fuel futures prices. The tense geopolitical situation in Iran not only affects Iran’s fuel oil export expectations and Middle Eastern fuel oil exports but also impacts natural gas supply expectations in the Middle East. The energy crisis effect is driving fuel futures prices higher. Currently, attention should still be paid to the developments in US-Iran relations. Once an agreement is reached, there may be significant negative impacts on high-sulfur fuel oil. In the medium to long term, Middle Eastern fuel oil power generation demand is gradually being replaced by natural gas and photovoltaic energy, which constitutes a long-term bearish outlook for high-sulfur fuel oil: after Saudi Arabia’s fuel oil power demand is replaced, Saudi Arabia is expected to increase fuel oil exports. (CITIC Futures)