1. Evaluation Outlook: biennial listing, stable foundation

Arbitrage on the inside and outside of the market and increase trade profits

Reduce the cost of materials by long hedging and prevent drop of the price of products by short hedging

Future direction

Can meet liquidity support, continue to expand market capacity Historical data is fully available, free market is open and transparent The risk control system is flexible to avoid extreme risks.

Long road, continue to seek

2. Closing Positions: the number of positions has increased rapidly, and the speculation has fallen.

■ Trading positions in 2018 have steadily increased. On the first day of listing of crude oil futures on March 26, 2018, open interest reaches 1779 lots and trading volume are 42,000 lots. Since then, positions have steadily increased, reaching nearly 30,000 lots by the end of the year after the introduction of the market maker system and the reduction of fee rates, the trading volume has significantly increased to a maximum of 330,000 lots.

■ Steady trading volume and open interest fell in 2019. High-frequency market-making contributed to a large increase in transactions in the short term, but the growth rate of positions was not as fast as the transactions, which resulted in a high ratio of open volume to open interest, which once became the most speculative variety in China. Through the market-making business adjustment, the trading volume has dropped; the position has remained stable, with an average annual increase of 45%.

■ The number of positions will increase significantly in 2020. International oil prices fluctuated sharply in 2020, and positions in domestic crude oil futures also increased rapidly, increasing more than three-fold within three months. As of March 25, 2020, the total SC holdings reached 115,000 lots. The ratio of volume to open interest was also reduced to 1.5, which was close to the normal level of international crude oil futures.

3. International Comparison: third in the world, the gap is still large

■ SC is the third largest crude oil futures in the world. From January to March 2020, the average daily holdings of Brent/WTI/SC/ Oman were 256/219/6 /0.6 million lots, and the average daily trading volume was 116/157/8/0.6 million hands. The holdings of Brent /WTI are 40/34 times that of SC, and SC's future development space is still huge.

■ Increased participation of SC foreign investors. As of the end of 2019, SC overseas / general Legal personality / special Legal personality positions accounted for 20%/30%/30%, respectively, and the trading volume accounted for 15%/25%/10%. About two-thirds open interest of Brent and WTI's come from production/trade/consumer companies, and about one-third from investment equity. The domestic industry still needs to be improved so far. Domestic real value preservation is still dominated by Brent. If some of the spot hedging positions can be returned in the long run, it will help improve the SC participation structure.

4. Price Formation: The overall valuation is reasonable, and short-term differentiation exists

■ The overall valuation is relatively reasonable. Based on the DME Oman valuation system, the deviation of the SC market price over 90% of the time is within ± 3 USD / barrel. The main factors affecting the fluctuation of the Brent/SC market include: the RMB exchange rate, tanker freight, and the spread between Brent and Dubai / Oman. Oil tanker freight rates experienced two sharp upward movements in October 2019 and March 2020, which had a significant impact on the internal and external market prices.

■ There is short-term spread deviation. In addition to the endogenous factors of the valuation system, factors such as delivery quotes. capital operations, and trading rules may also cause short-term deviations in the internal and external market spreads. For example, the spread fluctuation of change of the market expectations before the delivery of the SC1809 contract in the first month of August 2018 and the large fluctuations in the external market in March 2020. The internal market was unable to synchronize with the external market due to the two constant down limit of the daily limit, which caused the extreme spread to deviate from the situation.

5. Physical Delivery: the model is gradually mature, and the oil species are relatively concentrated

■ Good delivery function. Since the listing of SC, it has delivered 16 times in total, with a total of 20.47 million barrels and a delivery amount of 9.1 billion yuan. The average delivery ratio of all contracts is about 50%, of which SC1809 and SC1912 reached 100% delivery rate.

■ Basola light oil is the main delivery oil. Since the listing of SC, a total of 13.72 million barrels of registered warehouse receipts have been generated, of which Basra light oil / Oman crude oil / Upper Zakum / Qatar Offshore Oil registered 932/350/50/50 ten thousand barrels respectively. Basra light oil accounted for 68%.

■ The largest number of registered warehouse receipts in Petro China Dalian warehouse. CNPC Dalian / Sinochem Xingzhong / CNPC Zhanjiang / Shanghai Yanshan /Cezi Isle has accumulated registered warehouse receipts of 474/388/272/160/78 ten thousand barrels. The oil type delivered by PetroChina Dalian warehouse is mainly Oman oil, and other regions are mainly based on Basra light oil.

6. Hedging Function

■ There is no need for hedging upstream. The main domestic crude oil producers are PetroChina, Sinopec, and CNOOC, which supply refineries mainly through internal settlement prices. About 80% of China's crude oil demand comes from imports, and domestic supply is limited. At present, there is no selling value protection operation on SC.

■ Mid-stream operation is more mature. Crude oil traders are the main operating industry entities of SC. Crude oil hedging operations are relatively mature. EEEUP, UNIPEC, Sinochem, Zhenhua oil, some foreign companies and private refineries have begun hedging/arbitrage operations through SC. Although the long-term correlation of refined oil is high (0.8), it may deviate greatly in the short term, and the operation mode still needs to be explored.

■ Preliminary downstream trials began. With the drop in oil prices to low levels in 2020, some airlines and cargo companies also began to try to buy and maintain value through SC.