(57) A heavy oil such as a crude or petroleum residuum is upgraded to a liquid product suitable for use as a low sulfur fuel or as an FCC feedstock by mild thermal cracking to produce a two-phase reaction mixture comprising a liquid, predominantly paraffinic product and a thermoplastic carbonaceous product which may be separated from the liquid product in a phase separator. The liquid product may be hydrotreated to remove residual heteroatoms, after which it may be used as fuel or as FCC feedstock. The carbonaceous product may be coked or used as such. Some heating of the heavy oil feed for the mild thermal cracking may be done by mixing it with hot hydrogen to achieve the desired temperature. Solvent addition, or use of whole crude as feedstock, aids liquid/liquid separation in the phase separator.