On August 19, the domestic daytime trading session saw the fuel oil market stage another violent rebound. The FU09 main contract closed at 4295 in the late session, up 6.36% from the previous settlement. LU10 finished at 4998, rising 1.44%, while LU09 settled at 5456, gaining 2.06%. On the geopolitical front, prospects for peace in the Middle East remain bleak, with U.S. officials stating that President Trump has instructed the negotiation team to suspend contacts with Iran.

Looking solely at the FU09 contract, the pace of gains has accelerated sharply over the past seven days, forging a strong independent path that diverges from the crude oil market. The 1-3 month backwardation structure has widened aggressively to 470, reaching the highest level for this time of year in recent years, underscoring the robust strength of near-term spot supply. On August 18, Singapore's high-sulfur 380cst spot premium climbed to $33 per ton, continuing to set fresh records. Meanwhile, domestic coking unit production margins have recovered from -67 yuan per ton in mid-July to +363 yuan per ton in the week of August 14, with refinery profitability unlocking and boosting feedstock procurement enthusiasm.

The FU-SC spread once trended higher, distinguishing itself from BU/LU-SC, as the sector rotated into a pattern of FU > SC > LU > BU. Persistent supply tightness expectations continue to amplify upside momentum, with the 09 contract even exhibiting signs of a squeeze. On the capital front, massive inflows have poured into the fuel oil segment. FU open interest surged 39% (+163,000 lots) in a single day, while LU open interest jumped 57% (+59,000 lots). In terms of warrants, FU futures warehouse receipts stood at 20,420 tons on August 19, down 15,000 tons over five days, a significant drawdown of 42%.

With South Asian power generation demand gradually winding down and bunker fuel demand growth proving insufficient, the demand support may now hinge on feedstock requirements. The fundamental tightness could ease. Should geopolitical risks recede in tandem, there is substantial room for downside. Caution is warranted regarding the potential unwinding of the geopolitical risk premium. The short-term outlook remains bullish, but valuations are stretched to extremes, and chasing highs is not advised.

Turning to asphalt, the BU09 contract rallied strongly during the domestic afternoon close on August 19, settling at 4548, up 2.99% with relatively moderate volatility. The uptick in asphalt was largely driven by cost-side factors, as its own fundamental narrative remains subdued. The market has yet to kick off the large-scale "golden September, silver October" stocking season, and current prices are already trading at a premium. Several constraining signals are converging: first, the five-day moving average of the Shandong basis has contracted sharply from 74.86 to 36.57, with the spot-to-futures premium rapidly evaporating. Second, the BU-Brent crack spread only turned positive at +3.31 on August 13, only to fall back to -12.57 by August 17, indicating poor rebound sustainability. Third, exchange warehouse receipts have surged 45% in ten days (+8,290 tons to 26,500 tons), with sellers registering large volumes of warrants in preparation for delivery, directly pressuring near-month prices. Additionally, BU trading volume has dropped 21.8% over ten days, with capital interest far weaker than in FU/LU.

Amid geopolitical uncertainty, the market is largely adopting a wait-and-see stance, with caution prevailing on near-month deliveries. Once the peak demand season of "golden September, silver October" arrives, there is a likelihood of triggering trader restocking behavior. Demand recovery could then support a market rebound, in turn underpinning asphalt prices, though August typhoon risks may exert a temporary negative effect. In the short term, cost factors will play the decisive role. Should geopolitical conditions ease, the downside safety margin for asphalt is higher than for SC, FU, and LU. The 09 contract is expected to trade in a wide, volatile range in the near term. Watch for opportunities to buy the BU-FU spread on dips.