Crude oil

Crude oil: OPEC relaxes production restrictions, but still cannot meet demand growth

At the OPEC ministerial meeting on April 1, OPEC decided to relax production restrictions. From the results, OPEC+ plans to increase its daily oil production by 350,000 barrels, 350,000 barrels and 441,000 barrels in May, June and July, respectively. In addition, Saudi Arabia will gradually cancel the voluntary production cut of 1 million since January. Barrels/day, it decreased by 250,000 barrels/day in May, 350,000 barrels/day in June, and 400,000 barrels/day in July. This result is equivalent to a gradual increase in production of approximately 2.1 million barrels per day before the end of July, and OPEC's total production has recovered from the current 24.8 million barrels per day to 27 million barrels per day. However, judging from the results of the meeting, although it is not the most optimistic situation expected by the market (maintaining the production quota unchanged), the result is still neutral and optimistic. On the one hand, the increase in production is still relatively cautious and eliminates the future The uncertainty of OPEC’s output within three months, on the other hand, from the perspective of demand, according to the current static balance sheet, OPEC’s relaxation of production restrictions may still not be able to meet the demand growth. According to the latest March balance of the three major institutions The table estimates that the Call on OPEC of EIA, OPEC, and IEA in the second quarter were 2690, 2740, and 25.7 million barrels/day, respectively, while the Call on OPEC in the third quarter was 2780, 2800, and 27.9 million barrels/day, respectively. OPEC's production is expected to be around 26 million barrels per day, which is still lower than Call on OPEC in the second quarter. At the same time, if it needs to meet the demand in the third quarter, OPEC still needs to continue to increase production after July. Therefore, OPEC relaxes the production limit, but still cannot meet the demand growth. However, the demand forecast is also dynamic. The demand growth that has also been lowered by the OPEC technical committee this time is mainly due to the repeated occurrence of overseas epidemics. We believe that the current OPEC policy framework has not undergone major changes, and it is still in the range of price control that allows supply and demand to maintain a certain gap to eliminate inventory. The current OPEC production restriction policy has greater flexibility. If demand falls short of expectations, OPEC said it will not rule out further production cuts. Therefore, the current OPEC strategy is still to target demand. The core of the crude oil market is still whether demand can recover smoothly. The future will largely depend on the speed of vaccination in Europe and the United States and the formation of herd immunity.

Strategy: Neutral, hold the current position for now

Risk: No

Iron Ore

Iron Ore

The position on I2105 contract closed at ¥1110 per ton, i2109 closed at ¥979 per ton, the spread of Iron 5-9 contract is 131.5 yuan.

In terms of spot, the PB powder in Rizhao Port was ¥1,127 per ton, the discounted SSF price was ¥1168 per ton.

【Important News】

1. Mysteel: The iron ore arrivals in March increased from February to February. As of March 28, Mysteel estimated that China's iron ore arrivals in March will total 97 million tons, an increase of 12.034 million tons from February; It is estimated that the supply and demand gap of iron ore in April was 6.01 million tons, which expanded from the previous month. The price of iron ore is expected to fall in April.

2. According to foreign media reports, Indian state-owned mining company NMDC announced its iron ore sales for the 2020-21 fiscal year, which increased by 5.58% to 33.27 million tons (the Indian fiscal year runs from April to March this year).

【Trading Strategy】

1. The total iron ore inventory of 45 ports before the holiday was 13132 million tons, a slight increase on a week-on-week basis. In terms of varieties, lump ore and pellets entered the state of de-stocking again, and iron fine powder and coarse powder continued to accumulate. Shipments from Australia have increased significantly in the new phase, while shipments from Brazil are basically stable. On the demand side, due to the actual implementation of environmental protection production restrictions and the spread of production restrictions, at the same time, some blast furnace maintenance after the end of the heating season is superimposed. The average daily molten iron production dropped by 37,000 to 2.31 million tons, and the average daily port dredging dropped by 12 to 2.93 million tons from the previous month. The port pressure continued to decline. On the whole, as iron ore arrivals increased and demand was suppressed by overhauls and administrative restrictions on production, port stocks were slightly accumulated. Recently, the transaction and delivery of finished products have been good, and there is no obvious trend of marginal weakness; steel mills are more enthusiastic about production under the condition of considerable profits, and tend to purchase high-grade ore. At present, the driving force of iron ore is not obvious, and the market mentality gradually stabilized after the production limit reached expectations. The market rebounded after a sharp decline; if there is no policy reduction, there is still the possibility of upward repair discounts. However, under the medium and long-term Ministry of Industry and Information Technology's policy of reducing crude steel production, it is difficult for the molten iron to increase significantly. In the short term, it is expected to be mainly volatile.

2. Arbitrage: long thread or hot coil and short iron ore

(For reference only)

PTA

PTA: Centralized overhauls, processing costs rebound

Balance sheet outlook: TA maintenance is still concentrated in April, and it is expected to continue to be de-stocked. TA processing fees are expected to bottom out; however, PX is slightly accumulated in April, and PX processing fees are consolidating.

Strategic recommendations: (1) Unilateral: cautiously bullish. (2) Intertemporal: hold the current position.

Risks: The implementation of the PTA plant maintenance plan in April, and the sustainability of the improvement in the supply and demand of aromatics due to the gasoline premium.

Natural Rubber

Rubber: demand is acceptable, futures prices are expected to rebound slightly

Last week, the price of Shanghai Rubber first declined and then rose. In the first half of the week, due to repeated overseas epidemics and rising US bond yields, the market atmosphere was weak, and the main force of Shanghai Rubber was 14,000 yuan/ton. In the second half of the week, the price returned to above 14,000 yuan/ton. The repeated epidemics in European and American countries have also increased concerns about the demand for rubber tires. The relative weakness of NR has caused the price difference between RU and NR to continue to widen.

The total inventory of domestic exchanges as of April 2 was 176,806 tons (+904), and the amount of futures warehouse receipts was 171,960 tons (+1040). For the expectation of an increase in domestic delivery output, warehouse receipts continued to increase last week. As of March 28, inventory in Qingdao Free Trade Zone continued to fall slightly, and inventory outside the zone fell again. Due to the small overseas production and the high operating rate of domestic tire factories, it is expected that the destocking in the later period can still be maintained.

Affected by the weakening market atmosphere, spot prices continued to fall last week. According to Zhuo Chuang's understanding, new glue has been released in some areas of the production area. Although the current supply has not been significantly increased, the market is worried about the increase in supply; while the demand is low in the inventory, the company has a high level of operation, but lacks new growth points. The transaction atmosphere was relatively weak. Qingdao Free Trade Zone US dollar glue fell with the market; from the quotation point of view, the market is still dominated by Thai blends, and other types of glue are relatively limited, especially Matai blended smoked sheet glue. From the buying point of view, although the price of rubber continued to fall and the downstream continued to operate at a high load, the procurement of raw materials was still in demand, and the overall buying atmosphere was weak. The overall price of the external disk market has dropped. At present, the Thai production area is still in the low-yield season. The terminal buying sentiment has cooled, and the market is mostly wait-and-see. Affected by this, the US dollar cargo price has loosened and declined. As of last weekend, the premium of rubber synthetic rubber was -700 yuan/ton (+25). The price of natural rubber rebounded slightly last week, and the spread narrowed slightly. At present, there has been anti-substitution demand in the downstream.

In terms of downstream tire operating rate, as of April 1, the operating rate of all-steel tire companies was 78.17% (+0.14%), and the operating rate of semi-steel tire companies was 74.17% (+0.81%). The recovery of domestic and overseas demand has brought about a continuous recovery in operating rates, and it is expected that the current operating rates can continue to be maintained until May.

Viewpoint: The price of Shanghai Rubber continues to narrow with the current spread of non-standard period. Although the current spread can still attract hedging orders, the sharp drop in the previous period may be basically reflected. With the warming of the market atmosphere, futures prices have also begun to stabilize. At the time of delivery in the main domestic producing areas, the supply of Shanghai Rubber increased from the previous month, while the demand remained basically unchanged. After the current price difference returns to its place, the drive of supply and demand on the disk is still weak, and Shanghai Rubber needs more peripheral tire rubber to drive it. The biggest concern in the near term is that the global lack of chips will hinder automobile production, which will also drag down tire demand. In the mid-line perspective, due to the lack of global supply, the season will continue to April-May. During this period, the overall supply increase will be limited. Domestic demand can be maintained. The launch of vaccines will also slow the recovery of overseas demand. The overall demand growth momentum will remain unchanged. The depot of dark rubber is expected to continue, which still supports rubber prices. After rubber prices stabilized last week, prices are expected to rebound slightly.

Strategy: Bullish cautiously

Risk points: Domestic supply has increased sharply, demand continues to weaken due to the epidemic and other impacts, and funding is tight.

Copper

Copper

Last week, Shanghai copper closed at 67090 yuan/ton, up by 2000 yuan/ton, an increase of 3.07%, and decreased 4759 lots to 34,0000 lots.

【Important News】

1. [Chile’s closure of the country may affect the supply of domestic copper concentrates in the second quarter] Chile announced on April 1st local time that in response to the rapid increase in the number of cases caused by the coronavirus, the government decided to shut down from April 5 to May 1 border. International transportation is only allowed for emergency, humanitarian reasons or medical purposes. The border closure of Chile this time may result in a delay in import shipments to China.

2. Workers at the Radomiro Tomic copper mine under Chile's state-owned copper giant Codelco accepted the company's new contract on Wednesday, alleviating concerns about possible strikes. The union said in a statement that the contract proposal was approved, adding that there were many votes in favor of the strike, but the required absolute majority had not yet been reached.

3. White House officials and Biden's allies revealed that the Biden administration plans to pass the $2.25 trillion infrastructure plan by wooing Republican voters, independents, mayors, governors, and local politicians.

【Trading Strategy】

1. Chile announced last Friday that it will close its borders from April 5th, which may further aggravate the tension of copper concentrates. In terms of consumption, as the peak consumption season approaches, the absolute copper inventory is still at a low level over the years, and the company's raw material inventory is also at a low level. Copper prices are unlikely to show a trend downward trend for the time being, and remain volatile within the range temporarily.

2. Arbitrage: At present, copper consumption has not fully recovered. Real estate, infrastructure and other orders are relatively weak. High copper prices have also restrained some copper consumption. The supply of copper scrap is abundant. The downstream favors copper scrap is relatively strong. Copper is still in storage. At this stage, the peak season may not arrive until mid-April, and the arbitrage market will wait and see for the time being.

3. Options: continue to hold put options, that is, sell CU2105-P-60000

(For reference only)