The US government increased its strategic crude oil reserves and oil prices rebounded sharply yesterday. Judging from the news, the US government announced the collection and storage of 77 million barrels and Trump’s statement that the US would intervene in the oil market dispute at an appropriate time boosted the market. The US government announced that it would initially collect and store 30 million barrels of crude oil from domestic shale oil producers, reflecting that the US government tends to protect the interests of domestic oil producers at the current oil prices. But for now, we think that the US government's reserves are far from enough to reverse the current crude oil fundamental pattern, and oil prices are currently difficult to bottom out, until the demand is improved (but the epidemic is still worsening), or the supply side has a sharp reduction. 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 plunge in oil prices on Wednesday, the domestic main PTA2005 and MEG2005 contracts closed at the daily down limit, and the panic sentiment was pushed to extreme. From the demand side, the operating load of downstream polyester companies has rebounded to around 80% and returned to normal gradually, but continuous upward space is expected to be limited. 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. However, the main factors affecting prices at this stage are concentrated in the cost of crude oil, and its own fundamental impact is relatively small. In general, we believe that the drop in price of polyester raw materials may come to an end after continuous sharp declines, and we should deal with it in a more positive way.
Yesterday futures prices fluctuated sharply, and the position was reduced and rolled. The price is still at the upper edge of the oscillating range since September 2019. Under the influence of the epidemic, we believe that the global demand for terminal iron elements has decreased, so we are bearish on iron ore in the medium and long term. The biggest uncertainty in the market in the short term is the concern over Brazilian iron ore transportation. Although it is a small-probability event, the impact is very serious due to our high external dependence, and the concern exists and are reflected in futures trading. Yesterday the port price of golden bubba powder is equivalent to ¥698 per ton, and the futures price was at a discount of about 3%.
Overseas rubber slumped. The main force contract of TF06 fell by 4.0 or 3.34% to 115.6. The main force contract of JUR08 fell by 7.2 or 4.47% to 154.0. The SHFE rubber rebounded. The main force contract of RU05 fell by 285 or 2.86% and closed at 9,680, and the main force contract of NR05 fell by 270 or 3.22% and closed at 8,110. The quoted price for Qingdao rubber in USD fell by $20 to $40 per ton with limited inquiries. The quoted price of RSS3 was $1,560 per ton. The spot price or CIF of STR20 was $1,190 to $ 1,200 per ton. The CIF of SMR20 in June was $1,210 per ton. The CIF of mixed rubber from Thailand in August was $1,210 to $1,220 per ton.
China Tire Dealer Network: Recently, Qingdao Sentury Tire Co., Ltd. stated that the company's tests found that the LT275/65R20 specification tires produced between June 25, 2017 and October 9, 2019 have insufficient durability and low air pressure performance with hidden dangers compared with the same products of other batches. After communicating with the National Highway Traffic Safety Administration (NHTSA) and clients, it actively recalled 6,188 tires of the seven brands of this specification. Although the test results show that the lack of durability is a brand product in the LT275/65R20 specification, Sentury has decided to recall all seven brand tires in this specification.
It was Japanese Vernal Equinox Festival, and local market was closed. The Thai cup lump price was 31.0 baht per kg, which equals to about $0.92 per kg. Since there were price records for cup lump in 2008 (2385 effective prices), only from December 9 to 12, 2008 (minimum $0.79 per kg for 3 days), and from December 29, 2015 to February 23, 2016 (minimum $0.83 per kg for 56 days) had recorded prices below $0.92 per kg.
Futures Operation Advice: The main contract has finished the rolling. In terms of the main RU09 contract, it is advised to wait and see on the RU09 contract and pay attention to the support at the recent low level at 9,850 below. For the unilateral long position, it is advised to control the position within 40%.
(For reference only)