Crude oil

Crude oil: differentiated performance of refined oil products, widening the spread between Brent and Dubai

Recently, Brent Dubai EFS has set a new high. We believe that this does not reflect that the spot market in the West Region is stronger than that in the East Region. Recently, due to the lack of arbitrage cargo in the eastern region, crude oil in the western region is facing greater sales pressure. At the same time, the increase in U.S. crude oil arrivals continues to suppress the North Sea discount, so the strong spread is more reflective of the current differentiation between the strengths and weaknesses of refined oil products. In particular, gasoline is stronger than diesel and fuel oil, resulting in light crude oil processing profit greater than medium and heavy quality. This is particularly noticeable in the United States where gasoline consumption is recovering smoothly. Therefore, the differentiation between strong gasoline and weak diesel is an important driver for the current widening of the price gap between Brent and Dubai.

Strategy: Neutral

Risk: No

Iron Ore

Iron ore: there are various news in the market, and futures prices are rising this spring

Opinion and logic: Yesterday, the iron ore futures trend was strong, with fluctuations rising throughout the day. The I2109 contract closed at 1048.5 yuan/ton, an increase of 36 yuan/ton from yesterday, and the spot price rose slightly by 1-6 yuan/ton. The transaction was more active.

Yesterday, the Steel Union announced the production, sales and inventory data of steel products. The five major materials produced 10.5 million tons. The output began to decline and fell by 70,000 tons. The statistical demand is 11.8 million tons, a week-on-week decrease of 470,000 tons, of which the consumption of hot rolled and wire rods has fallen more. The national trading volume of building materials was 230,000 tons and the transaction performed well.

On the whole, global iron ore shipments in the first quarter were relatively high year-on-year, while China’s share continued to decline. Inventories continued to accumulate at low levels and iron ore prices fluctuated at high levels. Recently, production restrictions have been reported in various parts of the country, including Yunnan, Jiangsu, and Wu'an. Environmental protection has been tightened, and some companies may face production pressure. Such production suppression will become the main logic of future transactions. At the same time, there were rumours yesterday that Tangshan's production restrictions were slightly loosened, causing iron ore prices to rebound sharply. Before the official documents issued by the Ministry of Industry and Information Technology, iron ore prices are still subject to high profits, strong consumption and the impact of overseas recovery. Under these circumstances, prices still have a certain degree of support.

【Strategy】

Unilateral: neutral, hold the current position in the short-term, long-term bearish; cross-species: go long position of finished products（thread or hot coil） and short position of iron ore

Inter-period: None

Spot-Futures Arbitrage: None

Options: buy at out-of-value 09 put options

Concerns and risks: The intensity of production restriction at the finished product end is not as good as expected, the demand for finished product end is strong, and overseas pig iron production has exceeded expectations by a large margin.

PTA

PTA: PX continues to promote cost-driven PTA price increases

Balance sheet outlook: TA will continue to de-stock in April as expected, and TA processing fees are expected to bottom out; however, PX has accumulated slightly in April, and demand for oil adjustments has prompted PX to strengthen beyond expectations.

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: The atmosphere turns to be bullish, and the price of rubber continues to rebound

On April 15th, the most active traded RU contract closed at 13,730 (+105) yuan/ton, the price of mixed rubber was 13,460 (-315) yuan/ton, the basis of most active traded contract was -555 yuan/ton (+95); the open interest of top 20 active traded long positions was 103,004 (+162) lots and the short position was 139,948 (+32), net short position was 36,944 (-130).

On April 15th, the most active traded NR contract closed at 10,855 (+200) yuan/ton, the STR in Qingdao Free Trade Zone was 1,660 (+10) US dollars/ton, the SMR was 1,632.5 (+7.5) US dollars/ton, and the SIR was 1,605 (0) US dollars/ton. The basis of most active traded contract was -375 (-210) yuan/ton.

As of April 9th: the total inventory of the exchange was 177,602 (+796) lots, and the warehouse receipts of exchange were 171,930 (-30) lots.

Raw materials: The market is closed on Songkran Festival. sheet rubber 61.12 (0), cup lump 43.15 (0), latex 58.2 (0), RSS3 61.82 (0).

As of April 8th, the domestic all-steel tire operating rate was 78.31% (+0.19%), and the domestic semi-steel tire operating rate was 73.93% (+0.38%).

Opinion: Rubber futures prices continued to rebound yesterday. Driven by the increase in crude oil prices, the current price gap between natural rubber and synthetic rubber continues to widen. Since the beginning of March, the pattern of higher synthetic rubber prices than rubber prices has been maintained, which is conducive to the counter-substitution of downstream demand. The tire factory operating rate still maintains an increasing momentum, reflecting the current demand is still good. At the same time, the overseas delivery has not yet arrived, and it is expected that the number of arrivals in the port will not be large in the later period. The downward trend of domestic port inventory may be expected to continue until May. In the early stage of domestic delivery, the output was small, and the support from the raw material side limited the room for the current decline in rubber prices. After the market atmosphere warms up, it may continue to rebound.

Strategy: Bullish cautiously, go long in short-term

Risks: a substantial increase in production, continued accumulation of inventory, and a substantial decrease in demand, etc.

Copper

【Copper】

LME copper continued to rebound yesterday, closing at US$ 9,310/ton, an increase of US$ 230/ton, or 2.53%; and increased by US$ 5,606/ton.

【Important News】

1. US retail sales in March rose by 9.8% month-on-month, a record high since May last year. The number of initial claims for unemployment benefits in the United States reached 576,000 from April 10th that week, a record low since the week of March 14 last year.

2. The U.S. 10-year Treasury bond yield fell below 1.55%, the first time since March 12, and the current intraday decline is more than 8.0 basis points. The yield on the 20-year U.S. Treasury fell more than 9.8 basis points, approaching 2.11%, and the yield on the 30-year U.S. Treasury fell more than 9.6 basis points, approaching 2.21%. The yield on the two-year U.S. Treasury fell by 0.4 basis points, hovering around a daily low ratio of 0.1570%, the yield on the five-year U.S. Treasury fell by more than 4.5 basis points, approaching 0.8%; the yield on the seven-year U.S. Treasury fell by about 6.6 basis points, approaching 1.23%.

【Trading strategy】

1. The chairman of the Fed emphasized that he will tolerate inflation above 2% for a period of time. Judging from the attitude and performance of the Fed, it is not eager to withdraw from easing. The tolerance for inflation may be higher than market thought, and U.S. bond yields will decline. In terms of fundamentals, the news of Chile’s closure of the country has not yet affected the production of copper mines, but it will affect shipments. The spot market for copper concentrates continues to be sluggish. Although the demand is indeed general and the inventory has been accumulating, in the current loose environment, funds may be more willing to believe the story of the bulls and pay attention to the pressure of the previous highs.

2. Arbitrage: At present, copper consumption has begun to pick up, but the supply of copper scrap is abundant, and the downstream favor copper scrap is relatively strong. Also, at present, both electrolytic copper production and imported copper are still relatively abundant. The peak season in April may not be prosperous, and the arbitrage is temporarily holding the current position.

3. Option: continue to hold the put option, that is, to sell CU2105-P-60000.

(For reference only)