Crude oil

The United States withdraws bidding for strategic reserves. Due to funding problems, the U.S. Department of Energy canceled 30 million barrels of crude oil strategic reserve bidding, and oil prices fell again. Currently, the United States has the willingness but lacks the means to support oil prices at the bottom. Generally speaking, the decline in oil prices is a good thing for the United States, which is equivalent to a large-scale tax cut and can reduce inflation and increase the US Federal Reserve’s monetary policy space. However, under the epidemic situation, the plunge in oil price may increase the risk of deflation and recession and hit oil producers and dragged down employment, so the United States is more willing to support oil prices in the current environment. Recently, Pompeo also talked with the Saudi King to try to stabilize oil prices through political means, but we believe that Saudi Arabia’s output policy is unlikely to change in the short term. The current oil market is still a stage of demand-led pricing. Once the tank capacity of onshore and floating warehouses is used up, oil prices will continue to fall. 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 near-month contract is recommended for Brent oil. Guard against the risk that epidemic was under control and OPEC reopens agreement to cut output.

Raw materials of Polyester

Yesterday, the price of domestic polyester raw materials was still in a trend of weak volatility at the low level. Due to the continuous spread of overseas epidemics, the export of textiles and clothing has been greatly impacted, and the demand side is facing significant pressure.

At the end of the month, several sets of PTA devices overhauled were restarted, and the supply pressure will appear once again. Moreover, the processing profit of PX, PTA and naphtha-made MEG chains is still high. Therefore, although the absolute prices of polyester raw materials are at historically low levels, oversupply pressure caused by the expansion of production profits will still suppress prices. Overall, the trend of PTA and MEG is still weak relatively.

Iron ore

Iron ore rebounded due to the suspension in South Africa for 21 days, and the recent low shipments in Brazil led to the continued low arrival in port, making short-term supply contradictions still not prominent. With the spread of the epidemic, the global demand for terminal industrial materials has been reduced, the sluggish sheet steel will force steel mills to cut production in the later period, and under the relatively rigid supply pattern, the iron element will be transformed into a surplus situation, and it is bearish on iron ore in the medium and long term. Affected by the uncertainty of the epidemic in Brazil in the short term, there are still concerns in the market, so the market may continue the volatile situation. Position management and operation on back-month contract are recommended. The spot price of golden bubba powder at the port is equivalent to ¥683 per ton.

Natural Rubber

Overseas rubber fluctuated weakly. The main force contract of TF06 fell by 1.1 or 0.98% to 111.7. The main force contract of JRU08 fell by 2.3 or 1.50% to 150.9. The SHFE rubber went up first and then retreated. The main force contract of RU09 fell by 60 or 0.61% and closed at 9,855, and the main force contract of NR05 rose by 85 or 1.05% and closed at 8,060. The quoted price for Qingdao rubber in USD fell by $10 to $20 per ton with general inquiries. The quoted price of RSS3 was $1,480 per ton. The spot price or CIF of STR20 was $1,130 to $1,140 per ton. The CIF of SMR20 in June was $1,170 per ton. The CIF of mixed rubber from Thailand in August was $1,190 per ton.

Tire World Network news: As the coronavirus epidemic continues to spread in Europe and the United States, many tire companies have suffered deep blows. Recently, the United States Tire Manufacturers Association (USTMA) urged the US government to provide economic assistance to tire companies and their workers, which includes relieving employees who have been disrupted due to virus, reducing taxes for employers who provide benefits to workers, etc. The association hopes that payroll taxes on some tire firms can be scrapped for at least the next three months. USTMA also requires Congress to ensure that their cross-border trade in North America is not adversely affected by restrictions on mobility.

It is the Burma's Army Day recently and local market is closed. The delayed tapping of the domestic Yunnan region in full scale has become a fact. The price of latex in some tapping regions is less than ¥8,000 per ton, and the expected price of latex in the factories in the uncut regions is ¥8,200 to ¥8,400 per ton. According to HNMY Rubber Network, the cup lump price is ¥8,900 per ton. The premium of latex price in terms of cup lump price is an unusual structure.

Futures Operation Advice: In terms of the main RU09 contract, it is advised to hold the long position in the short term and set a stop at the recent low level at 9,660 below.

(For reference only)