Crude oil

According to OPEC+’s previous production reduction agreement, the scale of production reduction will gradually decrease over time. May to June will be the month with the greatest output reduction. It is expected that OPEC+’ s output will start to rebound from July. A ministerial OPEC meeting will be held. It is worth paying attention to whether to adjust the scale and time of production cuts. At present, Russia frequently expresses its position on the issue of production cuts. We believe that it is mainly because of Russia’s special geological conditions. If the production cut time is too long, it will destroy the reservoirs of some oil wells, leading to a permanent loss of production, so we expect the market’s focus on supply to shift from the speed of reduction to the speed of recovery. Whether it’s OPEC+ or US shale oil, the future supply will recover with great probability, and the current shale oil recovery is slow. OPEC+ countries such as Saudi Arabia and Russia are still able to increase production rapidly. In terms of operation, it is advised to maintain the neutral strategy, and wait and see temporarily.

Iron Ore

The position on I2009 contract increased by 59 lots and closed at ¥703 per ton, the position on I2101 contract increased by 1,062 lots and closed at ¥634.5 per ton.

【Important Information】

1. According to the news from CPCA, the retail sales of the main manufacturers in the first three weeks of May reached an average of 37,000 units per day, and the year-on-year growth rate declined by 5%, and the performance was relatively stable. The retail sales in the first three weeks of May increased by 6% over the same period last year.

2. Tehran Times: the monthly output of Iranian steel reached 1.534 million tons in the first month of the Iranian New Year (March 20 to April 19, 2020). IRNA cited the data by the country’s steel producers and said that Iran’s steel output in the first month fell by 8% compared to the same period last year (1.668 million tons in the same period last year).

3. Wind data shows that this week (May 25 to May 29), local governments are planning to issue government bonds of 770.1 billion yuan, which is expected to hit a record high in the history of local bond issuance. Among them, the issuance of special bonds was 634.2 billion yuan, accounting for about 82.35%.

4. In terms of spot, the PB powder in Rizhao Port is ¥725 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥770 per ton.

【Trading strategy】

1. Arbitrage: After the recent rains in South China and East China, construction materials transactions and outflows have weakened. The profits of construction materials have been under pressure at high output. The demand is not expected to fall seasonally and the marginal adjustment is still in the electric furnace. Brazil's shipments have returned to the same level as last year. Brazil's current epidemic situation is still serious. It is expected that it will be difficult to maintain high shipments in the later period. It is recommended to continue to maintain the iron ore 9-1 cash and carry arbitrage strategy. At the same time, pay attention to the recent improvement in shipments in India and South Africa.

2. It is recommended to buy the iron ore seagull options on 09 contract when the market retreats, that is, buy I2009-C-690, sell I2009-C-750, and sell I2009-P-650.

PTA

The production and sales of polyester has improved, and the basis of TA continued the weak trend.

The estimated balance sheet in June and July is still accumulating rapidly under the current high inventory background. Under the background of polyester export demand suppressed by the epidemic, it is necessary to lower the PTA processing fee to prompt PTA to reduce production to rebalance. In terms of operation, it is advised to wait and see for unilateral strategy; for the strategy across varieties, it is estimated that the accumulated inventory of PTA will continue in May and June, and its performance will be weak; for basis trading and strategy across period, it is advised to focus on the basis adjustment ability of mainstream factories in the short term, which may provide good opportunity for reverse cash and carry arbitrage. It is advised to focus on the risks of unilateral volatility of recent crude oil prices, the turning point of the epidemic situation in the external market, the possibility of non-profit maintenance under the high production concentration of the PTA plant and the downstream restock space.

Natural Rubber

Overseas rubber went down slightly. The main force contract of TF09 fell by 0.4 or 0.34% and closed at 117.0. The main force contract of JRU10 was flat with the previous trading day and closed at 151.8. The SHFE rubber retreated. The main force contract of RU09 fell by 50 or 0.49% and closed at 10,220. and the main force contract of NR07 rose by 30 or 0.35% and closed at 8,485. The quoted price for Qingdao rubber rose by $5 to $15 per ton with general inquiries. The quoted price of RSS3 was $1,400 per ton. The spot price or CIF of STR20 was $1,180 to $1,200 per ton. The CIF of SMR20 in August was $1,200 per ton. The CIF of mixed rubber from Thailand in October was $1,240 per ton.

Autohome News: China Banking and Insurance Information Technology Management Co., LTD. reported that the average premium of new energy vehicles is 21% higher than that of fuel vehicles. With the continued growth of ownership, exclusive insurance has become an urgent need for new energy vehicle owners. The relevant person in charge of the China Banking and Insurance Regulatory Commission said: "The terms of the new energy vehicle have been initially consulted by the industry and relevant experts, and the next step will continue to be revised and improved, and strive to launch new energy vehicle insurance exclusive demonstration products as soon as possible. The person in charge pointed out: Premium income was 818.9 billion yuan, accounting for 63% of the total insurance premiums in the property and casualty insurance industry. The number of new energy vehicle vehicles underwritten nationwide was 3.47 million, accounting for only 1.4% of the total number of insured vehicles. Due to the small size, new energy vehicle insurance has been applied as the standard in fuel vehicles in the past, which is obviously not reasonable.

In terms of latex, after the domestic cut was postponed, overseas production started the seasonal increase, and the increase in supply is expected to make real purchases cautious. According to the latest data released by Zhuochuang, the domestic all-steel operating rate is 66.2%, up 1.3% week-on-week and down 12.3% year-on-year; semi-steel operating rate is 61.0%, down 3.5% week-on-week and 15.6% year-on-year. The resuming production of the semi-steel production line is still repeated.

Futures Operation Advice: The SHFE rubber was relatively weak over evening session. It is advised to pay attention to the pressure at the high level this week.

(For reference only)