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China Crude Oil Futures Weekly Report Monday ( October 15, 2018)

Fang submitted 2018-10-15 16:20:00

Part A: Review(2018/10/8-2018/10/12)

During the National Day holiday in China, the international oil price rose sharply and reached a new high. On October 3, Brent crude oil reached a maximum of 86.74 US dollars / barrel; WTI crude oil reached a maximum of 76.72 US dollars / barrel.

Affected by the National Day holiday, INE crude oil prices failed to reflect the rise of national oil prices in a timely manner. Domestic crude oil futures ushered in a substantial increase in the first trading day (2018/10/8)after the holiday. The SC1812 contract rose 2.97% to 572.5 yuan / barrel, the highest since the contract was listed.

On October 9, the SC1812 contract approached the daily limit twice, hitting a maximum of 598 yuan/barrel. The reason may be: First, affected by geopolitical events in the Middle East, domestic crude oil futures prices have been bullish in recent days. Second, on October 9, the People's Bank of China raised the central parity of the yuan by 9 basis points to 6.90. The expectation of RMB depreciation boosted the intraday price. Third, due to the Iranian tanker company was sanctioned, the freight rate of the tanker has risen. As can be seen from the Worldwide Tanker Nominal Freight Scale, the freight rate of the TD3 route has increased from 50 points to 75 pointsincrease the shipping cost of Middle East crude oil.

On October 10, 2018, the crude oil inventories announced by the American Petroleum Institute (API) increased sharply to 9.75 million barrels, and the US stock market fell across the board, dragging down risky assets such as crude oil. The WTICLX8 contract closed down $2.04, or 2.73%, to $72.63. The Brent COZ8 contract closed down 2.26, down 2.66% to $82.60. The INE SC1812 contract closed up 4.4 yuan, or 0.74%, to 597.3 yuan; the night fell 11.8 yuan, down 1.98% to 585.5. Unified conversion to RMB, INE crude oil price is higher than Brent crude oil price and WTI crude oil price. The reason why INE crude oil has become the highest-priced crude oil, partly because investors are worried about the depreciation of RMB – from October 8 to 9, RMB against the US dollar fell for two consecutive days, has fallen below 6.9 – once RMB depreciates against the US dollar, the price of INE crude oil will inevitably rise sharply.

On October 11, 2018, oil prices continued to plummet.In the short-term, crude oil prices are dominated by stock market panic, and EIA and OPEC reduced demand expectations, crude oil prices have recently experienced the mountain bike marketbut the spread between months is relatively stable , the market is driven not by

fundamentals but by market risk sentiment.

On October 12, 2018, INE crude oil futures SC1812 contract closed down 0.23% to 573.3 yuan / barrel.NYMEX crude oil futures closed up 0.73% to US$71.33/barrel, down 4.05% on a weekly basis, the largest weekly decline since July. Brent crude oil futures closed up 0.42% at $80.60 a barrel, down 4.23% on a weekly basis, the largest weekly decline since June. The reason may be: At present, the reasons for the sharp rise in international oil prices are insufficient. On the one hand, the United States’sanctions against Iran have been dragged on for a long time, and there have been signs of sanctions being discounted; More importantly, in the nearly one month of WTI crude oil prices rose sharply, the long positions have remained at around 650,000 lots without a significant increase. This shows that the rise in oil prices lacks the support of funds, but only the market that relies on emotional effects, its stability is very fragile.

Part B: Market dynamics

1.Exchange

On October 11, 2018, INE issued the " Announcements on Publishing the Market- Making Management Rules of Shanghai International Energy Exchange " and " Circular on Inviting Applications for Market Markers of Crude Oil Futures."

By providing reasonable quotes from market makers, it can provide effective trading opportunities for different types of market participants, improve the activity of contracts, promote the emergence of variety price discovery and hedging functions, and further enhance the ability of the futures market to effectively serve the real economy.

2. Place of origin

Iran, Iraq, Kuwait raise the official price of crude oil in Asian markets in November.

3. Import

According to data released by the General Administration of Customs, the import of oil in September was 37.213 million tons, down 3.04% from the 38.38 million tons in August.

In the first nine months of 2018, total crude oil imports reached 336,406 million tons, an increase of 5.85% over the same period of the previous year, and imports of 317,799 million tons in the same period last year.

4. Policy

China's Ministry of Commerce recently said that China's independent refineries will be able to apply for up to 202 million tons (4.06 million barrels per day) of crude oil import quotas in 2019.This will be 41.8% higher than the quota of 142.42 million tons (2.86 million barrels per day) in 2018. This may provide support for crude oil imports.

5. Refinery

In September 2018, the capacity utilization of local refineries in Shandong Province increased by 2.59 percentage points to 68.32%. The enthusiasm for the start-up of state- owned refineries has also generally increased. Taking the northeast region as the representative, the capacity utilization has increased by 9 percentage points.

In order to obtain sufficient crude oil import quotas in 2019, local refineries in China increased the demand for short-term purchases under the pressure of completing import quotas in October, thus boosting oil prices. But now that time has passed, according to the shipping data tracked by Bloomberg, the number of VLCCs that drove to China last week fell by 11 to 79, a record low in the last year, indicating that China has begun to slow down its procurement.

As of October 10, the average profit of Shandong local refineries this week was 103.3 yuan / ton, down 114.7 yuan / ton from the previous cycle, a decrease of 52.61%.Recently, crude oil has surged and continues to fluctuate at a high level. The average raw material cost of local refineries has increased by RMB 317/ton compared with the previous cycle. In terms of products, the market transactions of gasoline, diesel and other products were different, and the prices were mixed, and the average sales rose by only RMB 146/ton. Based on the above factors, the theoretical profit of Shandong refining may continue to decline.


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