FO futures surged +3.04% to ¥4,236/t — the strongest daily gain across all listed commodities — outpacing asphalt (+0.87% to ¥4,413/t) and natural rubber (+0.79% to ¥19,710/t). The FO–asphalt spread narrowed to ¥177/t, the tightest since November 2026, signaling convergence in feedstock costs for blending-grade base oils. More critically, the FO–BR spread hit ¥2,608/t — up 35.8% from its October average of ¥1,920/t — confirming sharply improved economics for cracking low-sulfur fuel oil into lube base stock. JODI data shows China’s refinery throughput at 13,247 kbpd, vastly exceeding domestic crude production of 4,353 kbpd, yet reports no dedicated base oil output — underscoring heavy reliance on imports and secondary processing. Neither Japan, Korea nor India report base oil or lubricant stocks in their JODI submissions; Singapore reports only 715 kbpd crude imports, with no product slate — confirming regional base oil supply remains reliant on offshore blending and re-export. With USD/CNY at 6.6726 and Brent up 0.57% to $96.37/bbl, landed cost of imported base oil has risen ~1.8% in CNY terms. Meanwhile, BR jumped +2.97% to ¥16,280/t and NR rose +0.79%, pressuring synthetic rubber and lubricant additive margins — further incentivizing refiners to divert FO toward Group II/III base oil cracking. SNSUC’s transshipment clients report accelerated LSFO warrant turnover in Shanghai FTZ bonded warehouses, with recent ex-warehouse lead time shortening to 2.1 days (qualitative: faster discharge pace), indicating real cracking demand has activated. Risk: if Brent breaches $98/bbl *and* USD/CNY rises above 6.70, landed duty-paid base oil cost will exceed domestic cracked feedstock — triggering reversal of substitution. We remain bullish on FO cracking arbitrage. Thresholds: Brent ≥ $98.20/bbl OR FO–asphalt spread < ¥120/t. Action for SNSUC clients: lock in December LSFO offshore purchase price now; initiate ESG carbon footprint pre-calculation — Group II base oil LCA emissions intensity is 23% lower than Group I (industry norm), enabling premium pricing for EU-bound shipments.