Crude oil

Discounts continue to increase in near month contracts, and it is advised to focus on remaining global tank capacity. With the spread of overseas epidemics, traffic control and city closure measures introduced by various countries continue to upgrade, and global oil demand continues to deteriorate. At present, under the influence of the epidemic, the effect of low oil prices on supply and demand has failed. No matter how low the oil price is, currently affected by the epidemic, the terminal demand will not be boosted by low oil prices. At present, only the strategic reserve and the stock reserve arbitrage increase in inventory reserve demand. On the other hand, the support of the cost side fails, although oil prices have fallen below the full cost of crude oil production in many countries, but compared to Saudi Arabia and other OPEC countries to increase production, the current rate and magnitude of production reductions caused by low oil prices makes little sense. Under the current circumstances, we believe that only the formation of an epic-level super “contango” will stimulate the market’s short-term oil storage demand to increase substantially, giving traders a huge arbitrage space, and transferring the near-end huge excess crude oil to inventory as soon as possible, and accelerating the bottoming out of oil prices. We expect that the discount rate in near month contracts will exceed that of 2008. The so-called cost is not the bottom of oil prices. At present, only the remaining tank capacity of 2 billion barrels in the world can save the oil market. In terms of futures operation, it is advised to maintain the short strategy; reverse cash and carry arbitrage strategy to long the back month contract and short the nearby contract is recommended for Brent oil. Guard against risks that epidemic was under control and OPEC reopens agreement to cut output.

Raw materials of Polyester

Affected by the continuous decline in oil prices, the domestic main PTA2005 and MEG2005 contracts continued the downward trend yesterday and kept hitting new lows. From the demand side, the operating load of downstream polyester companies has rebounded to around 80%, but the terminal recovery process has been slow, which has led to the inventory of polyester finished products still at historical highs. From the perspective of cost, as the price of the upstream drops more than the downstream, the processing profits of PTA and MEG did not fall but rise, coupled with the premium structure of the futures, the selling pressure on futures remains obvious. Therefore, the price of polyester raw materials may continue to seek support in the short term.

Iron ore

There have been a lot of news in iron ore market yesterday. A container port in Brazil went on strike, Vale's mixed mine in Malaysia was temporarily closed, and mines in Asmond, South Africa were heard to be stopped. Some news had a limited impact on the short-term supply of iron ore, but there were increasing concerns over iron ore transportation in Brazil, which has contributed to a sharp rise in the market yesterday. The price of iron ore is still in the upper range of the shock range since September 2019. Yesterday the port price of golden bubba powder is equivalent to ¥700 per ton, and the futures price was at a discount of about 4%. The recent low arrival in the port caused the decline in port inventory and supported market confidence. From the perspective of shipments, the volume of arrivals from Australia this week will return to normal levels, and port inventory is expected to stop falling. From the perspective of prices, unless there is a major event in supply, it will not be eligible for continued upward trend, while the short-term epidemic is spreading faster, and it is uncertain whether there will be problems at the supply or in the transportation side.

Natural Rubber

Overseas rubber slumped. The main force contract of TF06 fell by 4.3 or 3.47% to 119.6. The main force contract of JUR08 fell by 5.2 or 3.23% to 156.0. The SHFE rubber slumped at noon. The main force contract of RU05 fell by 370 or 3.58% and closed at 9,965, and the main force contract of NR05 fell by 265 or 3.07% and closed at 8,380. The quoted price for Qingdao rubber in USD fell by $20 to $40 per ton with obvious wait-and-see sentiment. The quoted price of RSS3 was $1,560 per ton. The spot price or CIF of STR20 was $1,240 to $ 1,260 per ton. The CIF of SMR20 in August was $1,300 per ton. The CIF of mixed rubber from Thailand in August was $1,300 per ton.

Data released by the Malaysian Statistics Bureau: Malaysia’s natural rubber output in January was 66,232 tons, up 13.3% from the previous month and down 13.0% year-on-year. Among them, exports to China accounted for 44.3% of the total exports of the month, followed by Germany (13.4%), Finland (5.1%), the United States (4.1%) and Italy (3.3%). Malaysia's natural rubber inventory in January was 288,586 tons, a year-on-year increase of 17.8%. The domestic consumption of natural rubber in Malaysia in January was 42,015 tons, a decrease of 22.9% from the previous month. The rubber glove industry occupies the main consumption force, with 31,686 tons of consumption, accounting for 75.4% of the country's total consumption.

The coronavirus epidemic is currently spreading in the upstream major producing countries. Growth rates of confirmed cases in Thailand, Malaysia, and Indonesia are still under control.

Futures Operation Advice: Yesterday morning, due to supply concerns, the rubber price once rose with palm oil. Affected by the plunge in Highly correlated copper, the SHFE opened lower and then went down at noon, and overseas rubber went down continuously with crude oil. As the main contract is rolling, it is advised to wait and see on the RU09 contract and pay attention to the support at the recent low level at 10,000 below.

(For reference only)