Crude oil

Crude oil: API inventory drops, oil prices continue to rise

In February, oil prices continued to rise for two consecutive trading days, arousing market concern. From a fundamental point of view, the pattern of weak market supply and demand has not changed significantly. The main recent bullish news comes from the following points: 1. Kpler shipping schedule data shows that OPEC cargo exports in January fell by 1.8 million barrels per day from the previous month. However, due to Saudi Arabia’s voluntary reduction of 1 million barrels per day and Russia’s reduction in exports, OPEC export pallets in February and March are expected to remain tight; in February and January, global crude oil inventories fell by more than 30 million barrels, and inventories fell sharply against seasonality. U.S. crude oil inventories have also continued to decline, and Cushing’s inventory is expected to drop to a historical low of 40 million barrels; on March 1st, Shell conducted a large-scale sweep of goods in the Platts window, and strong buying pushed up direct prices and discounts for physical goods, showing that Traders are optimistic about the market outlook. In summary, the core logic of current market transactions is the mismatch between supply and demand caused by OPEC’s cautious increase in production. Fundamentals continue to be tight in the first quarter. If OPEC still maintains a cautious increase in production strategy after the first quarter, then after the return of demand in Asia-Pacific, Europe and the United States Inventory will accelerate the depletion, and the focus of oil prices will further move up. The current OPEC production strategy is too conservative. It is worth to pay attention to whether OPEC meetings will be adjusted in the future.

Strategy: Be cautions, no strategic recommendations, waiting for the OPEC meeting

Risk: Iranian oil returns to the market ahead of schedule (For reference only)

Iron Ore
Iron Ore

The price of iron ore futures decreased, the position on I2105 contract closed at ¥934.5 per ton, the spread of Iron 5-9 contract is 80.5. In terms of spot, the PB powder in Rizhao Port was ¥1,054 per ton, down by 32, the discounted SSF price was ¥1115 per ton.

【Important News】

1. Mysteel: On February 2, the Mysteel 62% Australian index fell by 6.85, with a monthly average of 152.98; 62% low aluminum index was 150.25, fell by 6.85; 65% Brazil index was 173.65, fell by 6.85.
2. Mysteel: Australian and Brazilian iron ore shipped totaled 24.692 million tons, an increase of 4.920 million tons from the previous month; the total shipped from Australia was 17.047 million tons, an increase of 3.024 million tons from the previous month; of which, Australia shipped 13.134 million tons to China, an increase of 1.175 million month-on-month Tons; Brazil’s total shipments were 7.645 million tons, an increase of 1.896 million tons from the previous month. The total global shipping volume was 31.753 million tons, an increase of 5.512 million tons from the previous month.

【Trading strategy】

1. At present, the port's iron ore inventory continues to maintain a slight accumulation situation. The terminal demand is seasonally down, and the overall building material inventory is still accumulated. However, the production of molten iron remains at a relatively high level, and the market is uncertain about future expectations. On the supply side, the new phase of Australia-Brazil shipments has increased significantly, and follow-up needs to pay attention to the direction of the Australian hurricane and the intensity of the rainy season in Brazil; on the demand side, as the Spring Festival approaches, the blast furnace plant and electric furnace plant will continue to reduce production, and the production of molten iron may further decline before the holiday. If the terminal demand returns quickly and the destocking of building materials inventory accelerates, the output of molten iron will stop falling and rebound, and the iron ore port inventory will enter the destocking state again, which will support the price of ore. It is expected that iron ore prices may continue to fluctuate and run weakly before the holiday. After the holiday, attention should be paid to changes in the stocks of finished products and the increase of terminal demand. it is suggested to hold the current positions on iron ore in the short term

2. Arbitrage: Opportunity on Iron ore 5/9 (for reference only)

PTA
PTA: PX continues to strengthen, cost-based push up PTA
TA in February accelerates the seasonal accumulation of inventory, and TA processing fees are expected to be decreased; however, the de-stocking of PX in February increased, and the increase in PX processing fees is more flexible than the decreasing of TA processing fees . In terms of the unilateral strategy, it is advised to be cautious, arbitrage opportunity is not yet ready. For the risk, the seasonal overhaul of polyester and the sustainability of gasoline premium on the supply and demand

Natural Rubber
Rubber: Port inventory continues to decline, and downstream demand weakens

On Feb 2, the most active traded RU contract closed at 14,570 (-85) yuan/ton, the price of mixed rubber was 11,750 (+100) yuan/ton, the basis of most active traded contract was -345 yuan/ton (+160); the open interest of top 20 active traded long positions was 86,885 (-2055) lots and the short position was 137062 (-423), net short position was 50,177 (+1632).

On Feb 2, the most active traded NR contract closed at 10,675 (-175) yuan/ton, the STR in Qingdao Free Trade Zone was 1,630 (-5) US dollars/ton, the SMR was 1,610 (-5) US dollars/ton, and the SIR was 1,580 (-10) US dollars/ton. The basis of most active traded contract was -447 (+128) yuan/ton.

As of Jan 29 the total inventory of the exchange was 174,606 (-58) lots, and the warehouse receipts of exchange were 167,040 (+290) lots. Raw materials: sheet rubber 53.35 (+0.05), cup lump 38.9 (0), latex 45.5 (-1), RSS3 57.31 (-0.56).

As of Jan 28, the domestic all-steel tire operating rate was 66.81% (-1.14%), and the domestic semi-steel tire operating rate was 64.21% (-1.74%).

Viewpoint: The latest port inventory announced yesterday continues a slight downward trend. As the peak season is about to pass, the supply will enter the off-season after the year, and the rubber price supply side still supports. As the Chinese New Year is approaching, the downstream operating rate is showing a downward trend combined with the development of the epidemic at domestic and abroad, making the recent rubber price trend weak. At present, rubber is still in a pattern of weak supply and demand, with strong support from the supply side. Under the main line of demand recovery after the year, rubber prices are expected to remain strong and volatile, but due to high domestic absolute inventories, prices are still fluctuated
Strategy: Be cautious

Risks: a substantial increase in production, continued accumulation of inventories, a decrease in demand.

Copper

Copper

LME copper prices closed at $7752/ton, down by $70.5/ton, a decrease of 0.9% and decreased 4321 lots to 179,000 lots.

【Important Information】

1. The U.S. Senate initiated special procedures in order to set aside the approval of the $1.9 trillion stimulus plan by Republicans. Senate Majority Leader Schumer said that Biden and Yellen believed that the Republican Party’s bailout plan was too small.
2. GameStop, AMC and Silver all decreased, and retail speculation has also decreased. GameStop closed below $100 for the first time in a week, the market value evaporated by more than $27 billion, and the proportion of short positions in outstanding shares decreased to 51%.
【Trading Strategy】

1. Recently, the macro sentiment has turned, and the market expects that the liquidity turning point is coming, and the domestic capital is tight, and the copper price may fluctuate and weaken, but there may be some fluctuations in the market.
2. Arbitrage: There will be some problems when importing copper to the port from January to February. The Chilean terminal is affected by waves and the container capacity is suppressed by the epidemic and the spot is still tight. The epidemic in Malaysia has worsened and the import of recycled copper is also facing tightening. The seasonal accumulation in the first quarter of this year may not be as good as in previous years, and it is not recommended to consider monthly reverse arbitrage. After consumption resumes after the Spring Festival, arbitrage can be considered.
3.Options: Short on cross market option: CU2103-C-61000 and CU2103-P-54000 (For reference only)