Crude oil

The global epidemic updated, and the crude oil balance sheet continues to deteriorate. With the outbreak of overseas epidemics in major economies such as Europe and the United States, the epidemic prevention strategies of various countries have shifted from early casual resistance to more stringent social alienation measures, currently about 3 billion people in the world are at home and quarantine, accounting for 40% of the global population, the "oil demand vacuum" phenomenon appears in other regions except China, considering the severe impact of the epidemic on the transportation industry in the short term, Institutions continued to revise demand forecasts in March. According to the latest forecasts, mainstream research institutions such as PIRA, EA, and Goldman Sachs predict that global demand will decrease by 10% to 20% year-on-year during April to May. The excess supply and demand in the first half of this year may be 5 million barrels per day or more, and the crude oil balance sheet continued to deteriorate. At present, the cracking spread of refined oil products continues to decline. The poor profits of refineries are expected to lead to extended refinery maintenance or reduced processing load in the second quarter. The impact of the consumer side has begun to be transmitted from the bottom to the top of the industrial chain. Until global infectious population sees inflection point, oil consumption is expected to continue to shrink. With reference to China's situation, even if the most stringent epidemic prevention strategy is adopted, the recovery of consumption is expected to wait until June. In addition, with the shrinking of total demand, we also need to pay attention to the structural impact of demand. From a regional perspective, the number of infected people in Europe and the United States is significantly higher than that in the Asia-Pacific region, so the impact on consumption in the Western Region is significantly greater than in the Eastern Region. Brent Dubai EFS has also fallen sharply. From the perspective of oil types, jet fuel and gasoline that are currently the most affected are the weakest, followed by naphtha, diesel and fuel oil.

High-cost supply started to withdraw at low oil prices, but the supply pressure remained high in the second quarter. Although the benchmark oil price is currently near $20, some oil types have fallen to single digits. For example, local prices of WCS crude oil in Canada have been lower than the operating cost line of oil sands projects, some oil sands processing plants have begun to reduce supply or overhaul in advance. Recently, the number of US oil rigs has also started to decline rapidly. Considering that the completion rate of producers will slow down in the future, it is only a matter of time before the U.S. crude oil production peaks. Crude oil production in Venezuela is on the verge of collapse, and its output has fallen from 800,000 barrels per day to 400,000 barrels per day. Although at a low oil price, high-cost crude oil supply has begun to reduce production, the growth of total non-OPEC supply is expected to slow, but this is in line with the increase in OPEC in April Compared with the supply of about 3 million barrels per day, the current reduction in production is still too small and the reduction rate is too slow. At present, Saudi Arabia and Russia do not have the willingness to return to the negotiating table. We believe the crude oil supply pressure to remain high in the second quarter, but judging from market expectations, the increasing supply of Saudi Arabia, Russia and other countries have been reflected in oil price. Supply will not be worse than market expectations unless Libya resumes production, the current trend in oil prices will still depend on demand rather than supply.

In terms of futures operation, going bottom fishing in the current market environment is not the best strategy. High volatility coupled with deep discounts in near-month contracts, which means that whether holding the futures positions in near-month contracts and continuously rolling or buying call options of crude oil, time is the enemy of long positions. Even if oil prices remain at $20 per barrel, higher holding costs will lead to position losses. Under the current market environment, going bottom fishing is not the best strategic choice. Although the absolute price of crude oil is at a historically low level, the process of oil price recovery will be tortuous and lengthy. Before the current supply and demand pattern has not reversed, it is still 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 risks that epidemic was under control and OPEC reopens agreement to cut output.

Natural Rubber

Overseas rubber fluctuated weakly. The main force contract of TF06 fell by 1.7 or 0.52% to 111.0. The main force contract of JRU08 fell by 1.4 or 0.94% to 147.0. The SHFE rubber retreated. The main force contract of RU09 fell by 155 or 1.57% and closed at 9,700, and the main force contract of NR05 fell by 105 or 1.32% and closed at 7,870. The quoted price for Qingdao rubber in USD fell by $5 to $10 per ton with scarce inquiries. The quoted price of RSS3 was $1,470 to $1,480 per ton. The spot price or CIF of STR20 was $1,120 to $1,140 per ton. The CIF of SMR20 in June was $1,160 per ton. The CIF of mixed rubber from Thailand in August was $1,170 to $1,180 per ton.

Data from the National Bureau of Statistics: From January to February, among the 41 industrial sectors, the total profit of 4 industries increased year-on-year, and 37 industries decreased year-on-year. The automobile manufacturing industry decreased by 79.6% year-on-year, and the electrical machinery and equipment manufacturing industry decreased by 68.2% year-on-year. Among the industrial enterprises above designated size, the state-owned holding enterprises realized a total profit of 146.54 billion yuan, a decrease of 32.9% year-on-year; the joint-stock enterprises realized a total profit of 315.88 billion yuan, a decrease of 33.6% year-on-year; enterprises with investment from foreign countries and Hong Kong, Macao and Taiwan realized a total profit of 79.63 billion yuan, a decrease of 53.6% year-on-year; the total profits of private enterprises reached 120.83 billion yuan, a decrease of 36.6% year-on-year.

As of March 27, the subtotal of RU inventory was 242,000 tons, and the futures inventory was 237,000 tons, the difference between the two was 6,000 tons, which rebounded slightly. The subtotal of NR inventory was 74,000 tons, and the futures inventory was 54,000 tons. The difference between the two was 20,000 tons, up 18.2% week-on-week. According to the latest data released by Zhuochuang, the domestic all-steel tire operating rate was 64.3%, up 0.9% week-on-week and down 15.3% year-on-year. The decline in export orders began to restrict further improvement in operating rates.

Futures Operation Advice: In terms of the main RU09 contract, it is advised to wait and see and focus on the support at 9,600 below.

(For reference only)