Crude oil: Saudi Arabia's voluntary production cuts exceed expectations, and oil prices rebound sharply.
The results of the meeting of the Production Limitation Alliance were released yesterday. The overall results exceeded market expectations. Not only was the increase in output adjusted from 500,000 barrels/day to 75,000 barrels/day, Saudi Arabia also proposed to voluntarily reduce production by 1 million barrels/day (compared to Quota), which caused the market’s supply level of OPEC in the first quarter to drastically drop by about 1.5 million barrels/day, which is expected to fall from 25.5 million barrels/day in December to the production level of 24 million barrels/day. Judging from the meeting results Saudi Arabia’s determination to limit production and protect prices is firmer and its production strategy is more conservative than market expectations. This will make the balance sheet in the first quarter of this year turn from a weak balance to a tighter balance. It is expected that inventories will fall again, but still need to pay attention to oil-producing countries. The actual crude oil export level, OPEC exports increased by 1.2 million barrels per day month-on-month in December last year and whether the volume of exports and production matches needs to pay attention.
Strategy: Be cautious.
Risk: Iranian oil returns to the market, the U.S. dollar appreciates sharply, and the epidemic develops beyond expectations (For reference only)
The position on I2101 contract decreased by 280 and closed at ¥1110 per ton, the position on I2105 contract decreased by 16400 and closed at ¥1030 per ton, the spread of Iron 1-5 contract is 80, the spread of Iron 5-9 contract is 66.5. In terms of spot, the PB powder in Rizhao Port was ¥1,121 per ton. The price of Karara in Rizhao Port was ¥1175 per ton, the discounted warehouse price was ¥1187 per ton, the price of mixed powder warehouse receipt was ¥1170 per ton.
1. Mysteel: Australia and Brazil iron ore shipped 28.465 million tons, a decrease of 1.282 million tons month-on-month; Australia shipped 20.512 million tons, a month-on-month decrease of 1.210 million tons; of which Australia shipped 17.229 million tons to China, a month-on-month decrease of 1.307 million Tons; Brazil’s total shipments were 7.953 million tons, a month-on-month decrease of 72,000 tons. The total global shipment volume was 34.079 million tons, a decrease of 1.484 million tons from the previous month.
1. In terms of the inventory, the total iron ore inventory of the six ports in Diangang North was 71.38 million tons, a decrease of 2.7 million tons from the previous month, which was a large decrease. In terms of varieties, high- and medium-grade fines were reduced and low-grade fines were accumulated. In terms of shipments, the new round of data shows that shipments have fallen after the previous impulse. In Australia, the volume has decreased significantly, but it is still at a high level, which does not affect the recent increase in arrivals. The port of DAMPIER in Australia has an overhaul plan, which is expected to affect the shipments. The volume is 920,000 tons. On the demand side, due to the wide range of temperature drops, steel mills’ ports have reduced cargo and the average daily port dredging has dropped more; at the same time, the steel mills will use their in-plant inventory to meet the daily production, and replenishment needs are expected in the later period. At the same time, the average daily molten iron output slightly increased by 0.56 to 245.10, and steel mills are still enthusiastic about production. It is expected that there is still strong support on the iron ore and it is suggested to long 05 or 09 iron contract. (for reference only)
PTA: PX processing profits rebounded rapidly, supporting PTA costs
Gradually enter the seasonal accumulation period from January to February. In terms of the unilateral strategy, it is advised to be cautions due to covid-19. For the strategy across the period, arbitrage opportunity is ready. For the risk, there will be a decrease on the rate of polyester before the spring festival.
Rubber: Rainfall in Thailand, raw material prices rebound
On Jan 5, the most active traded RU contract closed at 14,415 (+170) yuan/ton, the price of mixed rubber was 11,850 (+100) yuan/ton, the basis of most active traded contract was -665 yuan/ton (-20); the open interest of top 20 active traded long positions was 95,577 (+659) lots, the open interest of top 20 active traded short position 139,740 (+1099) lots, and the net short position was 44,163 (+440).
On Jan 5, the most active traded NR contract closed at 10,685 (+25) yuan/ton, the STR in Qingdao Free Trade Zone was 1,660 (+35) US dollars/ton, the SMR was 1,620 (+15) US dollars/ton, and the SIR was 1,590 (+15) US dollars/ton. The basis of most active traded contract was -388 (-50) yuan/ton.
As of December 31: the total inventory of the exchange was 172,862 (+2042) lots, and the warehouse receipts of exchange were 160,570 (+1800) lots. Raw materials: sheet rubber 57 (+0.31), cup lump 38.1 (+1.1), latex 50 (+1.5), RSS3 59.93 (+0.77).
As of December 31, the domestic all-steel tire operating rate was 54.89% (-2.16%), and the domestic semi-steel tire operating rate was 54.91% (-2.07%).
Viewpoint: The price of rubber remained strong yesterday. Due to the rainfall in Thailand, the market continued to worry about supply reduction and the fear of port closure due to the epidemic in Thailand has not yet dissipated. The overall supply side support is strong. This week, due to the improvement of air in Shandong area, the operating rate of tire factories may rebound from the previous month. However, due to the export is still restricted, the rebound is expected to be limited. The overall supply and demand will show a month-on-month improvement. Rubber prices are expected to remain strong.
Strategy: Be cautious
Risks: a substantial increase in production, continued accumulation of inventories, a decrease in demand.
LME copper prices fluctuated and closed at $7856/ton, up by $102.5/ton, an increase of 1.32%, and decreased 3420 lots to 308,000 lots
1. The U.S. State of Georgia held a decisive round of elections for two Senate seats on Tuesday, and the results may be announced on Wednesday morning local time; this election will determine which party will become the majority party in the Senate and further determine the implementation of President-elect Joe Biden’s policies prospect.
2. The US ISM manufacturing index rose to its highest level in December. In the past few months, the manufacturing industry has steadily recovered from the impact of the epidemic at the beginning of last year.
1. The recent trend of LME copper price has been relatively strong and has reached a new high level. However, the appreciation of the RMB and the off-season of copper consumption have caused some large-scale wire and cable manufacturers to respond that orders have fallen by about 20%. The imported copper scrap has increased and flowed into the country gradually. The fundamentals have turned Weak, Shanghai Copper may still maintain a volatile trend in the short term.
2. Arbitrage: Hold the current position.
3.Options: Short on cross-market options, CU2102-C-60000, CU2102-P-54000. (For reference only)