FangQuant › Commodities Futures

China Crude Oil Futures Weekly Report (November 19, 2018)

Fang submitted 2018-11-19 12:54:30

Part A: Review (2018/11/12-2018/11/16)

From November 12, 2018 to November 16, 2018:the closing price of crude oil futures SC1812 contract on Friday was 466.7 yuan, 28.7 yuan lower than the closing price of the last trading day of last week. The highest price for this week is 500.2 yuan/barrel, and the lowest point is 456.1 yuan/barrel.

This week (2018/11/12-2018/11/16), the total volume of SC1812 contract was 1,553,050 lots, a decrease of 122,828 lots from last week. After the close of trading this Friday, the open interest of SC1812 contract was 23,936 lots, a decrease of 8,054 lots from the last trading day of last week.

Table: INE Futures Exchange Warehouse Stocks Daily (2018/11/14)

Medium Sour Crude

Oil unit:barrel

Region

Depot

On Warrant

Chg

Shanghai

Yangshan Oil

0 0
Zhejiang

SPRC Cezidao

201000 0

PetroChina Daxie

0 0

Sinochem-Xingzhong

0 0

Subtotal

201000 0
Shandong

SPRC Rizhao

0 0

Qingdao port DJK

0 0

Subtotal

0 0
Guangdong

PetroChina Zhanjiang

2223000 1923000
Liaoning

PetroChina Dalian

300000 0
Total 2724000 1923000

Note:Futures refer to the quantity of the commodities on warrant.

As can be seen from the above table, the daily warrants (2018/11/14) of the INE crude oil futures had increased by 1,923,000 barrels to 2,724,000 barrels than 2018/11/13.


Part B: Market Dynamics

1. Circular on the Delivery Issues of SC1812

The last trading day for crude oil futures contract SC1812 is November 30, 2018, and the delivery dates are from December 3 to December 7, 2018. Accordingly, Shanghai International Energy Exchange (hereinafter referred to as “the Exchange”) hereby notifies issues concerning delivery as follows:

(1) In accordance with the Article 142 of Delivery Rules of Shanghai International Energy Exchange, a natural person as a client shall close out all the positions of SC1812 before the market close on November 20, 2018.

Members shall remind the natural person clients to manage their positions by timely closing out.

(2)In accordance with the Article 8 of Delivery Rules of the Shanghai International Energy Exchange, the clients who cannot issue or accept the prescribed invoices of the Exchange shall not make or take the crude oil futures delivery.

Members shall remind their clients of concerning rules and fully understand the clients' qualification and capability of delivery. Clients who cannot or will not make or take delivery shall be well reminded of the liquidity risk while approaching the delivery month. Clients intending to engage in the delivery shall complete the opening of standard warrant accounts through the Standard Warrant Management System. Clients as buyers shall get prepared for the payments, while clients as sellers shall get the standard warrants ready.

(3)In accordance with the Article 31 of Delivery Rules of the Shanghai International Energy Exchange, the Exchange, in its sole discretion, may appoint specific Members, OSPs, Overseas Intermediaries or Clients to submit large trader position reports or other supporting materials.

Members shall know about their clients’ positions and manage risks in a sound manner. All parties concerned shall abide by the relevant rules and make preparations for the sound delivery of SC1812.

2. CSRC

On November 12, 2018, the China Securities Regulatory Commission and the

Monetary Authority of Singapore signed the Memorandum of Understanding on Futures Regulatory Cooperation and Information Exchange.

3. INE became the first futures exchange in China to obtain a RMO license in Singapore. The Shanghai International Energy Exchange (INE), a subsidiary of the Shanghai Futures Exchange, was approved by the Singapore Monetary Authority (MAS) on November 15, 2018 to become a recognized market operator (RMO), allowing

Singapore's eligible institutions and individuals to conduct transaction.

4. The country's first bonded 380CST fuel oil futures warehouse receipt was generated in Zhoushan

At 3:15 pm on November 14, Sinochem Xingzhong Petroleum Transfer (Zhoushan) Co., Ltd., the 2000 tons of bonded 380CST fuel oil futures warehouse receipts stored in the Laoshan Oil Depot was officially launched. This is also the first bonded 380CST fuel oil futures business in the country since it was listed on the Shanghai Futures Exchange.


5. Price adjustment

International oil prices are an important indicator of the price adjustment of refined oil

products in China. China's "Measures for the Administration of Petroleum Prices" stipulates that domestic gasoline and diesel prices will be adjusted every 10 working days according to changes in crude oil prices in the international market. The effective date of price adjustment is 24 o'clock on the release date of the price adjustment. When the price adjustment is less than 50 yuan per ton, no adjustment will be made, and it will be added or offset when it is included in the next price adjustment.

The last domestic refined oil price adjustment occurred at 24 o'clock on November 2, and the price of gasoline and diesel was decreased by 375 yuan and 365 yuan per ton respectively.

According to the recent changes in oil prices in the international market, and according to the current formation mechanism of refined oil prices, domestic gasoline and diesel prices (standard products, the same below) decreased by 510 yuan and 490 yuan per ton respectively from 24:00 on November 16, 2018. The largest reduction in the year.

6. Shandong spot crude premiums fall

Spot crude premiums on the Shandong market are edging lower, as independent refinery demand weakens.

The market is now trading ESPO Blend and Djeno crude cargoes for delivery in January, and Lula for February delivery. The need to build crude stocks before lunar new year public holidays — which fall mainly next year in the second week of February — was supporting demand for ESPO Blend and Djeno. But many have now completed stock-building. And demand for Lula, which trades further ahead, is thin as many refiners anticipate cutting runs over the lunar new year.

Russian light sweet ESPO Blend is trading at $3.50/bl over Ice March Brent for delivery in January, with standard payment terms 30 days after notice of readiness (NOR) and some 60¢/bl higher with payment 90 days after NOR, indicating that independent refiners' cost of credit remains stubbornly high. Lula, versus Ice April Brent for delivery in February, has slipped below $3/bl.

A refiner issued various trading companies a tender to supply 3mn bl different grades, including Yemeni light sweet Masila and Colombian heavy sour Vasconia — taking total reported trade on the spot market this month to slightly over 12mn bl. Little Masila crude tends to trade on the spot market but trading firm Cathay won a tender to lift 2mn bl of the grade loading in December at a premium of 79¢/bl to Atlantic basin marker North Sea Dated. No details have been revealed about the price at which it was sold on a delivered ex-ship (des) Shandong basis.

But falling product prices are further weighing on demand. Refiners had been ramping up throughputs to meet an expected jump in road sector haulage demand from the "Double Eleven" retail discount day. Retailer Alibaba reported record sales on 11 November of Yn213.5bk ($30.7bn). But tumbling crude futures prices — the month four Ice Brent contract against which Lula prices has fallen by $10/bl in the past month — prompted China's central government to slash pump price caps, pressuring wholesale products prices.

Pre-tax gasoline spot prices have collapsed as refiners' stocks of road fuel build. 93 Ron gasoline in Shandong is now around $87/bl, compared with $114/bl in mid- October. Pre-tax diesel spot prices in Shandong have fallen to $108.50/bl from $133/bl over the same period. Refiners have started to cut crude runs in response to weakening demand.

But independent fuel retailers, which have been severely squeezed in recent months, are once-again enjoying healthy margins now that spot prices have come down.


Gross product worth (GPW) refining margins for the three grades which Argus assess on a des Shandong basis — ESPO Blend, Lula and Djeno — have fallen sharply. The Lula GPW margin is around $5.50/bl compared with over $18/bl on 15 October, Argus assessments indicate. Djeno's GPW margin is around $1/bl below Lula but taking support from the strength of fuel oil prices, which have fallen less than prices for gasoline and diesel. The ESPO Blend GPW margin remains the strongest, at $8.80/bl, but it too has come down, from over $21/bl a month ago.

7. Chinese demand softens

A Chinese refiner issued a tender seeking Colombian medium sour Vasconia or Yemeni light sweet Masila crude, but further details were not immediately clear.

Vasconia was last heard trading in Canadian independent Frontera Energy's recent tender at discounts to February Ice Brent from $5.50/bl and $5/bl, reflecting a roughly $2.75/bl discount to competing Angolan crudes Hungo and Dalia on a delivered basis to China.

China, the primary market for Colombian crude near-term amid otherwise deteriorated arbitrages globally, could soon prove another difficult opportunity as independent refinery demand weakens ahead of potential cuts to refinery runs over the lunar new year.

Brazilian offshore Lula crude has been trading at a $2.90/bl premium to April Ice Brent on a delivered basis to the Shandong refining hub in China, or about 30-80¢/bl under February Ice Brent on an fob basis from La Paloma, Uruguay.

Market participants are valuing fob Lula much lower than the arbitrage would suggest, with recent indications at a roughly $2.90/bl discount to Ice Brent before delivery. The locational spread indicates sellers can gain a much higher profit by selling on a delivered basis.

The arbitrage appears to be improving to the Mediterranean, however, with Argus- assessed Vasconia now at a roughly 85¢/bl discount to competing Russian Urals crude after estimated delivery costs.

Part C: Transaction Summary

Since March 26th and up to November 16th closing, Shanghai crude oil futures’ cumulative trading volumes is 38. 07 million lots, and the cumulative trading volumes of the first month of listing (2018/3/26-2018/4/25) is 1.33 million lots. The cumulative amount of transaction is 19.24 trillion yuan (2018/3/26-2018/11/16), which is 33.93 times that of the cumulative amount of the first month of listing. Average daily turnover of 239,424 lots (2018/3/26-2018/11/16), and average daily turnover of 235,240 lots (2018/3/26-2018/11/9), as can be seen from the volume, the activity of the INE crude oil futures contract has improved. Open interest also rised steadily, with 3,558 lots on March 26th and 69,288 lots after the closing of November 16th.


Copyright by fangquant.com




Currently no Comments.