Crude Oil: OPEC the implementation of production cut rate remains at high level
From the report of the three major institutions in October, OPEC’s September output dropped slightly to 24 million barrels per day, and the implementation rate of production cuts remained above 100%. Looking at different countries, Saudi Arabia’s September output increased by 100,000 barrels per day. The UAE has cut production by 100,000 barrels per day. Other countries have not changed much. Libya's production has increased slightly. At this point, we expect that OPEC's strict implementation of production restrictions will not change. However, due to the resumption of production in Libya, OPEC production is expected to be 24.5 million barrels per day. The current market is focusing on whether the OPEC JMMC meeting at the end of the year will increase production by 2 million barrels per day in January next year as planned. Previously, Rongsheng Group purchased an additional 10 million barrels of crude oil in the Middle East spot market, which caused widespread market concern, in addition, due to the second phase of Zhejiang Petrochemical plant is expected to be put into the trial operation at the end of the year, we believe that OPEC's production increase is a high probability event under the expectation that the Asia-Pacific large refining and chemical projects will be put into operation in the future, but it is still unknown whether the market can match the increase in the market demand .
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
On October 19th, 2020, the position on I2101 contract increased by 5315 and closed at ¥791.5 per ton, the position on I2105 contract increased by 235 and closed at ¥739.0 per ton.
1. According to news on October 19, Brazilian mining company Vale SA announced on Monday that its iron ore output increased in the third quarter, and it is expected that the output in the fourth quarter in some areas will increase further due to the commissioning of multiple mines or accelerated production. The output of iron ore in this quarter was 88.7 million tons, an increase of 31.2% from the previous quarter and an increase of 2.3% from the same period last year. The company added that some logistics issues in the iron ore pellet and iron powder market were resolved in September, which will improve the timing between production and sales in the fourth quarter of the field.
2. According to data from the National Bureau of Statistics, in the third quarter of 2020, the capacity utilization rate of the ferrous metal smelting and rolling processing industry was 81.6%, an increase of 2.2% over the same period of the previous year; the capacity utilization rate of the ferrous metal smelting and rolling processing industry in the first three quarters was 77.7 %, a decrease of 2.2 percentage points from the same period last year.
3. In terms of spot, the PB powder in Rizhao Port was ¥859 per ton, golden bubba powder price was equivalent to ¥941 per ton,
1. In terms of supply, the number of shipments from Australia were basically flat, while Brazil saw a slight decline. The overall shipment level was still at a high level during the same period, and the supply pressure was relatively high. In terms of demand, the average daily molten iron output has decreased, and the average daily port dredging has decreased, coupled with environmental protection restrictions and new blast furnace maintenance, the overall demand has weakened. In terms of ports, the pressure on ports has increased and the dredging has decreased. Iron ore port inventories continue to accumulate. There is still a greater pressure to reduce prices in later stages, but the range of discount is relatively large. It is expected to be weak and volatile. It 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)
The second phase of Dushan Energy was put into production, and polyester production and sales fell slightly.
In October, we will continue to estimate the de-stocking, follow up by the implementation of the overhaul and the continuity of demand improvement. 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 current TA pattern is long in short-term and short in long-term, in late October, there is a chance to continue the rebound; in addition, the accumulated warehouse concerns from November to December followed by the peak of seasonal terminal loaded, and the rebound gives space for varieties allocation; 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.
RU: October 19th, 2020, the main force contract of RU01 down by 50 or 0.36% and closed at 14,025. The main force contract of JRU03 up by 3.5 or 1.74% and closed at 204.1. Yunnan WF closed at 13,500 to 13,650 yuan per ton, Hainan SCRWF closed at 13,650 to 13,700 per ton, the secondary standard rubber closed at 11,800 per ton, and Thailand’s RSS3 closed at 17,500 yuan per ton.
NR: The main force contract of NR12 down by 45 or 0.44% and closed at 10,135. The main force contract of TF12 up by 2.3 or 1.53% closed at 152.8. Qingdao rubber in USD up by $30 per ton. The spot or CIF of STR20 was $1,620 to $1,650 per ton. The CIF of SIR20 in October was $1,520 to $1,550 per ton. The CIF of mixed rubber from Thailand in January was $1,570 per ton to $1,580 per ton.
Tire Business News: It is understood that the Egyptian State-owned Chemical Industry Holding Company (CIHC), has signed a cooperation agreement with the Egyptian Ministry of Public Enterprise Development (NOMP) and the Arab Organization for Industrialization (AOI). Under the terms of the new agreement, a national industrial alliance will be established, which will manufacture tires for various types of cars, tractors and heavy equipment. In order to implement the plan, a new tire factory will be established in the city of Ain Sokhna in the Suez Canal Economic Zone. The area is approximately 450,000 square meters.
Futures Operation Advice: There is an intensive volume of rainfall in Hainan area. The local latex is reported to be 12,500 yuan/ton, the premium is 650 yuan/ton for the Yunnan glue, and the Hainan thick latex is about -2800 yuan/ton. The high premium indicates that the limitation of Hainan latex supply cannot meet the demand for concentrated latex and full latex at the same time, which is rare in the peak production season. Downstream tire inventories are transferred from factories to the traders, and it is reported that the terminal shipments have slowed down. For the main RU01 contract, it is suggested to long a slight position and pay attention to the pressure at the recent high level. (For reference only)