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### Daily Market Review on Specified Futures Products 2020.03.23

submitted 2020-03-23 09:53:31

Crude oil

Refined oil consumption slumps, Colonel pipeline throughput drops by 20%. In the last round of oil price slump from 2014 to 2016, as the global price of crude oil fell more than that of refined oil, refinery profits increased significantly. After 2015, the global refinery's processing capacity increased significantly, converting a portion of crude oil inventory into refined oil inventory. That is, low oil prices have brought about an increase in the marginal demand for crude oil. However, in this round of epidemic-led declines, similar logic failed due to shrinking terminal consumption. At present, the price of refined oil products has fallen more than crude oil, especially gasoline and jet fuel. The recent cracking spread has dropped significantly. The global processing volume of refineries are expected is expected to decline significantly in the second quarter. At present, the forward curve of refined oil products has been transformed into deep Contango like crude oil, which means that in the future, refined oil products will be accumulated with crude oil. Last week, the largest product oil pipeline in the United States, the Colonial Pipeline, reduced its transportation volume by 20%, the gasoline transportation volume decreased by 300,000 barrels per day, and the distillate transportation volume decreased by 240,000 barrels per day, mainly due to the sluggish consumption in the eastern United States. As a result of the high level of refined oil stocks, the decline in the transportation of refined oil from the Colonial Pipeline is expected to affect the processing capacity of the US gulf refinery by nearly 1 million barrels per day, unless the US Gulf refinery increases its refined oil exports, and due to the sluggish consumption in overseas markets, the export of refined oil products is more difficult at present. On the Chinese side, although terminal demand has improved and refinery processing volumes have picked up, the current domestic refined oil market is still relatively surplus. The market predicts that China's refined oil exports will continue to increase in the future. According to Kpler's shipping schedule data, as of March 17, China’s refined oil exports increased by 150,000 barrels per day from February. It is expected that with the increase in refinery processing volume, exports will grow further in the future, which will put more pressure on the Singapore refined oil market. As more and more flights are grounded, global jet fuel consumption is currently suffering a catastrophic blow. According to Energy Aspect's calculations, it is estimated that the global jet fuel consumption loss from April to May will reach 2.7 million barrels per day, accounting for total aviation coal consumption. Some industry insiders even estimate that the consumption loss will be as high as 50%. At present, the price difference between Singapore jet fuel and diesel has fallen to -7 US dollars per barrel, which is the weakest performing product in the current refined oil. The market is currently worried for the storage capacity of jet fuel, according to the JBC forecast, there are only 50 million barrels storage tanks left on land in jet fuel. According to the current trend, jet fuel may be the first of the oil products to run out of onshore inventory. Jet fuel can also be stored in diesel storage tanks, so there may be some flexibility. However, it is expected that oil storage in offshore floating warehouses will be inevitable in the future, and due to the plummeting demand for jet fuel, the processing capacity of European refineries is currently expected to drop by 1 million barrels per day in April. According to Energy Aspect, it is estimated that 1.5 million barrels per day have been reduced in March. Therefore, under the influence of the epidemic, it is expected that the global Refined oil consumption has been catastrophically hit. It is expected that the decline in global refined oil storage and refineries will continue in the second quarter. 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.

Natural Rubber

It was Japanese Vernal Equinox Festival last Friday, and local market was closed. The main force contract of TF06 went up slightly and rose by 2.2 or 1.90% to 117.8. The SHFE rubber fluctuated. The main force contract of RU05 rose by 95 or 0.95% and closed at 10,055, and the main force contract of NR05 rose by 120 or 1.48% and closed at 8,230. The quoted price for Qingdao rubber in USD rose by $5 to$20 per ton with general inquiries. The quoted price of RSS3 was $1,520 per ton. The spot price or CIF of STR20 was$1,190 per ton. The CIF of SMR20 in June was $1,220 per ton. The CIF of mixed rubber from Thailand in July was$1,230 per ton.

QinRex news: Yokohama Rubber agreed to provide economic support to Thai natural rubber farmers and improve its traceability to ensure transparency and robustness of the supply chain. Yokohama's activities to ensure the sustainability of natural rubber include: 1. Joint research with universities on natural rubber. 2. Promote the widespread use of "agricultural forestry", thereby bringing more stable income to rubber farmers in the country. 3. Regularly communicate with natural rubber suppliers on the Supplier Day.

As of March 20, the subtotal inventory of SHFE rubber was 244 thousand tons, and futures inventory was 240 thousand tons, the difference between the two was only 4 thousand tons, and the willingness to trade was low. Meanwhile, the data released by Zhuochuang showed that the domestic all-steel operating rate was 63.7%, and the relative increase in production was 16.8% week-on-month, and the year-on-year relative decrease was 15.4%. The production line mainly replenishes the previous orders, and personnel is the main reason for restricting the further increase in production. There is a slight accumulation of finished product inventory.

Futures Operation Advice: In terms of the main RU09 contract, it is advised to wait and see and pay attention to the support at 9,800 below.

(For reference only)