Crude oil

The US crude oil prices have fallen into negative values in nearby month contracts. Yesterday, WTI prices fell sharply in nearby months before expiration, and fell to -37 USD per barrel, which is rare in history. Although the US crude oil spot market has shown negative prices before (which has occurred in the natural gas market), it is such a large negative price on the largest pricing benchmark crude oil, which exceeds our and market expectations. Negative prices mean that the seller has to pay the buyer to fetch the oil. The reason for this extreme situation is that the seller has no excess storage capacity and the demand is basically zero at the same time, and the seller is also reluctant to close the oil well. In fact, the negative oil price includes the seller’s potential shut-in costs, storage and logistics costs. Yesterday US oil market had a large short force for rolling when Cushing reached the capacity limit in May. We noticed that there were 100,000 lots of positions left in May yesterday after reducing positions by 40,000 lots. April 21 is the date these positions were last held. We expect that some of these positions will be liquidated by brokers, and it is expected that negative prices may deepen further. Looking ahead, if Cushing maintains full inventory in the next few months, it is expected that there will be more negative prices before contracts are close to delivery. At present, the market is more concerned about whether there will be negative prices for Brent crude oil that will be delivered at the end of April. We believe it is unlikely because Brent belongs to cargo oil and the delivery mechanism is cash delivery based on the Brent index. Floating warehouse oil storage provides an upward limit for the Brent monthly difference, but the current Brent futures price is still overvalued relative to the spot, and it is expected that there will be greater downward pressure before the delivery.

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-month contract is recommended for WTI. Pay attention to the risks of epidemic under control and unexpected supply disruption.

Raw materials of Polyester

The domestic polyester raw material futures prices continued to show a trend of differentiation yesterday, PTA continued its downward trend, and MEG continued the pattern of the previous rebound, and the price difference between the two further widened to ¥300 per ton. From the demand side, the terminal production and sales rate is still weak yesterday, and demand has not improved significantly. On the supply side, the PTA spot processing fee dropped to around ¥660 per ton, the price difference between PX and naphtha process stabilized at around $275 per ton, and the profit of naphtha-made MEG was still around $90 per ton, but losses of the coal-made process are still serious, and domestic MEG operating rate remains low with some EG turning to EO. Overall, we believe that the MEG will still be stronger than PTA in the short term.

Iron ore

The lack of pressure on the iron ore supply side recently is the main reason for the repeated shocks in the market. Because of the large discount, the market will not be smooth until the spot pressure is accumulated enough. From the shipping schedule, it is estimated that the pressure of arrival at the port before April is still not great. After May, the arrival of Brazil will increase significantly. On the demand side, the bottom pressure of steel is expected to increase at the end of April. Therefore, it is recommended to control positions and wait for the accumulation of contradictions. In terms of spot, the current spot price of golden bubba powder in the port is equivalent to futures price at ¥699 per ton, and PB powder is equivalent to futures price at ¥720 per ton.

Natural Rubber

Overseas rubber was relatively strong. The main force contract of TF07 rose by 1.3 or 1.13% to 116.1. The main force contract of JRU09 rose by 1.0 or 0.65% to 154.9. The SHFE rubber went strong. The main force contract of RU09 rose by 90 or 0.90% and closed at 10,140, and the main force contract of NR06 rose by 135 or 1.64% and closed at 8,380. The quoted price for Qingdao rubber in USD rose by $10 to $20 per ton with general inquiries. The quoted price of RSS3 was $1,440 per ton. The spot price or CIF of STR20 was $1,170 to $1,180 per ton. The CIF of SMR20 in August was $1,210 per ton. The CIF of mixed rubber from Thailand in September was $1,220 per ton.

QinRex: On April 18, the Deputy Director of the National Industrial Park Authority of Thailand Zara said that the authority decided to increase the land sales price and rent price of the Songkhla Rubber Industrial City by 10% from July 1 this year. Songkhla Rubber Industrial Park is Thailand's national factory base for developing rubber industry clusters, covering industries and factories in the middle to downstream of the rubber industry, such as rubber innovation products, latex products production, compound rubber production and rubber processing related industries.

In terms of synthetic rubber, crude oil futures fell to a negative value, which will once again increase the pressure on the cost side of the recently stabilized synthetic rubber prices. As of the beginning of April, the delivery inventory of TOCOM RSS3 in Japan was reduced by 172 tons to 9,522 tons, of which 624 tons were into the warehouse and 796 tons were out of the warehouse. De-stocking is still ongoing.

Futures Operation Advice: As for the long position in main RU09 contract, it is advised to set a stop at the previous low level at 9.900.

(For reference only)