Q4 outlook: Middle East and Venezuela crude arrivals are expected to recover, partially easing the domestic bitumen feedstock shortage.

We forecast Q4 domestic bitumen output at 5.9 million tonnes, up 950,000 tonnes or 19% quarter-on-quarter, but still down 1.21 million tonnes or 17% year-on-year.

With the traditional off-season approaching and bitumen prices elevated, demand is expected to fall quarter-on-quarter, while continued contraction in highway investment weighs on consumption; Q4 bitumen demand is projected to drop 25% year-on-year.

We estimate the Q4 bitumen market will be tight before loosening, with total inventory peaking in November; watch for opportunities in weakening bitumen monthly spreads and cracking spreads.

Bitumen Supply-Side Analysis

In the first three quarters of 2026, domestic bitumen output totaled about 14.6 million tonnes, down 6.97 million tonnes or 32.3% year-on-year.

By group, Sinopec and local refineries suffered the most obvious losses; Sinopec was mainly constrained by Middle East feedstock shortages and refined product supply obligations, while local refineries faced dual supply cuts from Iran and Venezuela.

Since mid-July, navigation through the Strait of Hormuz was again disrupted, and Middle East and Iranian crude exports fell sharply.

However, the UAE used ports such as Fujairah, more ship-to-ship transfers appeared in the Gulf of Oman, and Red Sea exports took on a greater role, gradually lifting Middle East crude exports from their trough.

In 2026, U.S. actions in Venezuela reshaped the country's oil export landscape; Venezuela's exports nearly doubled from last year but have so far not been shipped to China.

Still, as the international situation evolves, local refineries may again be permitted to import Venezuelan crude.

The Q4 bitumen feedstock shortage may improve, with output expected to rise.

Looking ahead to Q4, crude arrivals from the Middle East and Venezuela are expected to recover, partially easing the domestic bitumen feedstock shortage.

We forecast Q4 domestic output at 5.9 million tonnes, up 950,000 tonnes or 19% quarter-on-quarter, but still down 1.21 million tonnes or 17% year-on-year.

Bitumen Demand-Side Analysis

Bitumen demand is directly linked to highway construction investment progress and phased project starts.

In 2026, affected by the earlier high base, local debt-resolution pressure and a maturing road network, national highway fixed-asset investment continued to decline, down 9.9% year-on-year cumulatively through August.

The industry has fully shifted from "large-scale new construction" to a stage of upgrading existing assets.

In the first three quarters of 2026, bitumen demand fell by about 6.69 million tonnes or 28.9% year-on-year.

Compared with 2025, the scale of highway investment continued to shrink in 2026, with a higher share going to upgrading existing assets and smart, green initiatives, while the share of traditional new projects declined.

Market demand is mainly driven by quality improvement and maintenance of existing roads, and incremental demand from entirely new highway projects is expected to be limited.

With the traditional off-season approaching and bitumen prices elevated, demand is expected to fall quarter-on-quarter, while continued contraction in highway investment weighs on consumption; Q4 bitumen demand is projected to drop 25% year-on-year.

Bitumen Inventory-Side Analysis

In the first three quarters, although bitumen demand was curbed by high prices and insufficient investment, supply contracted even more markedly; national bitumen inventories continued to destock in Q3, with total inventories at historic lows.

Based on expectations of a 17% year-on-year decline in Q4 bitumen supply and a 25% year-on-year decline in demand, we estimate the Q4 bitumen market will be tight before loosening, with total inventory peaking in November.

Bitumen Cost-Side Analysis

Since petroleum bitumen is a product of crude oil processing, bitumen prices and trends have a direct positive correlation with crude oil trends.

In Q3 2026, affected by Middle East geopolitical tensions and Strait of Hormuz navigation conditions, crude prices overall stayed high, and strong discounts on medium and heavy crude provided solid cost support for bitumen prices.

Looking ahead to Q4, geopolitics remain highly uncertain, and oil prices may stay rangebound at high levels.

Overall, the center of bitumen production costs may remain elevated.

Tight Before Loosening, Watch Market Structure

Looking ahead to Q4, crude arrivals from the Middle East and Venezuela are expected to recover, partially easing the domestic bitumen feedstock shortage.

We forecast Q4 domestic output at 5.9 million tonnes, up 950,000 tonnes or 19% quarter-on-quarter, but still down 1.21 million tonnes or 17% year-on-year.

With the traditional off-season approaching and bitumen prices elevated, demand is expected to fall quarter-on-quarter, while continued contraction in highway investment weighs on consumption; Q4 bitumen demand is projected to drop 25% year-on-year.

We estimate the Q4 bitumen market will be tight before loosening, with total inventory peaking in November; watch for opportunities in weakening bitumen monthly spreads and cracking spreads.

Fuel Oil Cracking Spreads Retreat, Watch Low-High Sulfur Divergence

From January to August 2026, Singapore marine fuel oil sales totaled 37.77 million tonnes, up 2.5% from the same period last year.

In September, persistently high freight rates continued to curb arbitrage cargo inflows from Europe.

At the same time, U.S.-Iran hostilities escalated again, casting a shadow over Middle East supply prospects, and with Russian cargoes still missing, Singapore's high- and low-sulfur fuel oil markets remained tight.

Downstream bunkering demand was relatively stable, but summer high-sulfur fuel oil power generation demand weakened before September, easing Singapore's high-sulfur fuel oil tightness to some extent.

Looking ahead to Q4, on the supply side, persistently high freight rates will continue to curb arbitrage cargo inflows from Europe; although some medium-sulfur components will flow from Brazil and the Mediterranean into Asia's low-sulfur fuel oil market, compliant finished marine fuel supply in the market will remain limited.

Middle East tensions will continue to curb high-sulfur fuel oil outflows, and Russian inflows will also remain absent, keeping the high-sulfur fuel oil market tight.

On the demand side, global seaborne shipments will stay high before Christmas, and bunker refueling volumes will peak.

Japan and South Korea will start winter power stockpiling, Northeast Asia power generation demand will gradually strengthen, and low-sulfur fuel oil demand will enter its peak season.

As regional refineries face restricted crude procurement, feed demand for high-sulfur fuel oil will increase.

However, as temperatures fall, high-sulfur fuel oil power generation demand in the Middle East and South Asia will drop sharply.

Overall, Q4 low-sulfur fuel oil fundamentals will be stronger than high-sulfur fuel oil; watch for opportunities in a widening low-high sulfur spread.

Core View

Q4 bitumen output down 17% year-on-year; Q4 bitumen demand down 25% year-on-year; Q4 bitumen production costs may remain elevated; Q4 bitumen supply and demand tight before loosening; Q4 watch for opportunities in a widening low-high sulfur spread.