Crude oil

The supply and demand of the three major institutions are adjusted, but the volume of destocking in Q3 is not as expected.

The monthly reports of the three major institutions were released last week. Overall, the adjustment direction of the inter-institutional balance sheet is not consistent. EIA revised the demand growth down this month, OPEC revised supply growth up, and the IEA balance sheet adjustment has not changed much, but overall, The COO (Call on OPEC) in the third quarter of this year has been revised down to a certain extent, reflecting that the market's destocking effort is not as good as the agency's expectations.

Demand: EIA predicts that the demand will decrease to 8.62 million barrels/day in 2020, a decrease of 230,000 barrels/day from the previous month, of which OECD will reduce 190,000 barrels/day, and the non-OECD will reduce 40,000 barrels/day. The decrease from United States is larger about 190,000 barrels per day, and India has also slightly revised downward by 60,000 barrels per day. OPEC predicts that the demand in 2020 will fall at 9.47 million barrels per day year-on-year, which will be revised down by 10,000 barrels per day from the previous month. Demand in China will be revised up slightly, and demand in Europe and the United States will be revised down slightly. The IEA predicts that global demand in 2020 will fall by 8.36 million barrels per day year-on-year, up by 70,000 barrels per day from the previous month, the United States will be revised down slightly, and China will be revised up slightly, and demand growth will slow down in September.

Non-OPEC supply: EIA expects that 2020 non-OPEC supply will drop by 2.23 million barrels per day from the same period last year, and it will be revised down by 30,000 barrels per day from last month's estimate. The United States and Canada will be revised upwards, while other major oil-producing countries will be revised downwards. EIA expects that US crude oil production this year will fall by 800,000 barrels per day year-on-year. OPEC expects 2020 non-OPEC supply to fall by 2.37 million barrels/day, which is an increase of 310,000 barrels/day from last month, of which the US supply is revised up by 320,000 barrels/day, mainly due to the larger increase in liquid production in July. OPEC expects the annual US liquid output fell by 660,000 barrels per day. 2020 non-OPEC supply is expected to fall by 2.55 million barrels per day, an increase of 70,000 barrels per day from the previous month, and the US supply has been revised up by 50,000 barrels per day.

OPEC production: According to the EIA standard, OPEC production in September increased by 70,000 barrels/day to 24.02 million barrels/day, of which Saudi Arabia’s production increased by 110,000 barrels/day, and the UAE reduced production by 100,000 barrels/day. Other countries had little change and reduced the production. The regulation rate is 103%. In September, OPEC production fell by 50,000 barrels/day from the previous month to 24.11 million barrels/day, and OPEC’s overall production cut compliance rate was 104%. According to IEA, OPEC production in September fell by 340,000 barrels per day from the previous month to 24.08 million barrels per day, and the overall OPEC compliance rate rose to 106%.

Call on OPEC: EIA estimates COO for 2020 at 24.06 million barrels/day, which is revised down by 190,000 barrels/day from the previous month. According to the EIA balance sheet, the difference between supply and demand in the first to fourth quarters is 5.8 million barrels/day and 7.3 million barrels/day, -3.1 million barrels/day, -3 million barrels/day, the balance sheet for the next three quarters continued to be revised (the gap between supply and demand is narrowed). OPEC’s 2020 COO is estimated to be 22.35 million barrels/day, a decrease of 320,000 barrels/day from the previous month. From the first to fourth quarters, COO is 2080, 1670, 2450, and 27.5 million barrels/day. The IEA's 2020 COO is estimated to be 23.43 million barrels/day, which is revised down by 60,000 barrels/day from the previous month. From the first to the fourth quarter, COO is 2,200, 1650, 2640, and 28.8 million barrels/day.

Strategy: Neutral and bearish relatively, reverse cash and carry arbitrage strategy on Brent, long the sixth lines and short the first line

Risk: supply disruption caused by geopolitical events and sustained sharp depreciation of the US dollar

Iron Ore

On October 16th, 2020, the position on I2101 contract increased by 2195 and closed at ¥801.5 per ton, the position on I2105 contract decreased by 4426 and closed at ¥744.0 per ton.

【Important Information】

1. Mystee import volume of iron ore inventory on Oct 16th: in the current period, the total import iron ore inventory of sample steel mills was 110043900 tons, increased by 227700 tons on a month on month basis; at present, the daily consumption of imported iron ore of sample steel plants was 3.06 million tons, decreased by 6600 tons month on month, the consumption ratio of inventory was 35.96, and decrease by 0.39 month on month.

2. According to the media reports, during the period from January to September, the crude steel output of ArcelorMittal Kryviy Rih was 3.64 million tons, a year-on-year decrease of 15.8%; the output of pig iron was 3.64 million tons, a year-on-year decrease of 10.5%. During this period, the company's finished steel output was 3.37 million tons, down by 2.1% year-on-year; the output of sintered ore was 6.67 million tons, down by 10.2% year-on-year.

3. In terms of spot, the PB powder in Rizhao Port was ¥880 per ton, golden bubba powder price was equivalent to ¥953 per ton,

【Trading Strategy】

1. Currently, the total shipments of iron ore to Australia and Brazil have decreased slightly, but they are still at a high level. In terms of volume, Australia basically remain the same volume, while the number of shipments in Brazil have decreased, and the impact of foreign iron ore is small, and the supply of the domestic iron ore is still under pressure. Recently, the environmental protection restrictions have posted. The output of 247 molten iron has declined slightly, and the operating rate and capacity utilization rate of steel blast furnaces have dropped slightly, and the demand has slowed down. In terms of ports, the pressure on ports has increased, and the port dredging has decreased. The iron ore port inventory continues to accumulate, and there is still greater pressure on the spot price in the later stage.

However, the range of discount is relatively large, it is expected to be volatility and is suggested to long 01 coking coal and short on 01 iron ore

2. Option strategy: It is advised to hold the short position on i2101-C-870. (For reference only)

PTA

PTA: The volume of texture continues to decrease, which boost the demand for TA.

In October, if all the overhauls are fulfilled, the inventory will continue to decrease, and it is advised to focus on the overhauls development. There is an expectation of rigid accumulation in November and December.

In terms of the unilateral strategy, it is advised to be neutral; for the strategy across varieties, the high inventory problem has not been resolved yet, and it is not advised to maintain the strategy across varieties, but the willingness of the upstream factory to maintain and control should still be judged based on the change in processing fees; for strategy across period, it is advised to focus on the reverse cash and carry strategy opportunity after the next round of TA overhauls fulfilling and rebound of 1-5 spread. It is advised to focus on PTA factory inspection and fulfillment wishes, and the downstream restocking space and improvement of demand.

Natural Rubber

October 16th, 2020, the main force contract of RU01 up by 285 or 2.06% and closed at 14,110. The main force contract of JRU03 up by 3.3 or 1.67% and closed at 200.6. Yunnan WF closed at 13,000 to 13,100 yuan per ton, Hainan SCRWF closed at 13,100 to 13,150 per ton, the secondary standard rubber closed at 11,300 to 11,500 per ton, and Thailand’s RSS3 closed at 17,000 yuan per ton.

NR: The main force contract of NR12 down by 115 or 1.14% and closed at 10,015. The main force contract of TF12 up by 0.1 or 0.07% closed at 150.5. Qingdao rubber in USD up by $5 to $25 per ton. The spot or CIF of STR20 was $1,550 to $1,560 per ton. The CIF of SIR20 in October was $1,40 to $1,495 per ton. The CIF of mixed rubber from Thailand in January was $1,545 per ton to $1,550 per ton.

ANRPC report: The global output of natural rubber from January to August decreased by 8.7% from the same period last year to 7.778 million tons. It is expected that in the remaining four months of the year, the production will decrease by 3.8%. The total production for the whole year of 2020 is expected to be 12.901 million tons, a decrease of 6.8% from the previous year. The revised global supply outlook is 1.9% lower than the last month's outlook report which showed the estimated output was 13.149 million tons, a decrease of 4.9% from the previous year.

Futures Operation Advice: The volume of the rainfall in Thailand was normal, with an average daily rainfall of 11.88mm in October, a cumulative year-on-year increase of 37.3% in 90 days. As of last Friday: subtotal of RU inventory is 246,000 tons, inventory futures is 212,000 tons, the difference between the two is 34,000 tons, and the growth rate of warehouse receipts has slowed by 47.4% year-on-year; subtotal of NR inventory is 39,000 tons, and inventory futures is 3.6 10,000 tons, the difference between the two is 4,000 tons, and the growth rate of warehouse receipts accelerated by 14.7% week-on-week. For the main RU01 contract, it is suggested to long a slight position and held until it reaches a high level in recent years. Pay attention on the risk of a fall (For reference only)