On the night session of October 28, the fuel oil front-month contract settled at CNY 5,485/t, up 3.39% on the day and outpacing bitumen's +2.71%. The fuel oil-to-bitumen spread flipped from discount to a CNY 406/t premium, the second such stable inversion since September.

The driver is residue yield reallocation. As the northern heating season approaches, bonded low-sulphur bunker (VLSFO) liftings rise, and refiners have shifted about 4 percentage points of vacuum residue away from delayed cokers toward VLSFO blending. Coking-feed economics soften as a result, and petroleum coke supply tightens at the margin, yet coker margins stay positive so units are not cutting runs.

For SNSUC's transshipment book, stronger fuel oil lifts bonded bunker procurement cost, but the seven-variety crude landing formula is anchored to Brent x FX x 7.33 x grade, and fuel oil sits outside that basket, so transshipment margin is unaffected. Operationally, during the winter VLSFO premium window, locking price through bonded warehouse receipts beats spot buying; move bunker purchases from spot to receipts to capture the spread rather than bet on direction.

Short term, the FO-BIT spread pivots around CNY 400/t: above it, coking feed yields to bunker blending; below it, coking economics return. At CNY 406/t the switch has already started, and the spread should hold positive through month end.