Crude oil

Demand for refined oil: The darkest moment has passed, and it will gradually recover in the second half of the year. The high probability of global demand for the whole year has bottomed out in April, and will gradually recover in the second half of the year. In the short term, the demand for social alienation measures will quickly recover, but in the medium term, it will be constrained by the downturn in jet fuel consumption and the economic contraction. The resulting structural demand decline (the increase in the number of unemployed people, the greater impact of industries such as hotels and restaurants, the superposition of many factors such as changes in travel methods), it is expected that it will be very difficult to fully recover before the epidemic within this year. According to estimates from the May monthly reports of the three major institutions, consumption in the fourth quarter of this year is about 96% of the same period last year. The short-term global demand recovery momentum is driven by the gasoline consumption after the relaxation of isolation, but in the second half of the year, the future consumption recovery momentum will be more depending on the endogenous growth of the economy and the recovery of the aviation industry. We believe that the growth of demand in the second half of the year should not be too high. The dragging effect of the two middle distillates of coal and coal will continue in the second half of the year, and the recovery of demand will be tortuous and slow.

Refinery demand: China’s overbought is unsustainable, and global refinery profits need to be repaired urgently. We believe that China’s overbought is unsustainable because it brings two problems: one is the problem of excess domestic refined oil, even if the domestic downstream demand recovers even faster, in the context of the current local refining operation rate as fast as 80% and the export of refined oil halved month-on-month (imports of light cycle oil, blended aromatics and other oil blending materials have also increased significantly), the domestic excess of refined oil is an inevitable result. When the social stock of refined oil increases to a certain extent, it will inevitably force the load of the refinery to decline; second, China’s overbought and the Middle East’s production cuts have superimposed the global crude oil spot premium rebound, and the crude oil futures discount in recent months has also narrowed rapidly. This price difference structure on the one hand makes floating warehouse oil storage no longer economical, and even some traders have already begun to sell floating warehouses to cash profits.

Crude oil supply: The peak of production cuts is now available and will gradually recover in the future. Both OPEC and non-OPEC have experienced substantial production cuts from May to June this year. The total global production cuts have reached 14.5 million barrels per day, mainly because the OPEC+ production reduction agreement came into effect in May and has been well implemented. On the other hand, non-OPEC also experienced a significant passive production cut due to low oil prices. However, in terms of supply outlook, we believe that the low point of supply for the whole year will be in June, and that supply will also recover following demand from July.
Inventory and supply-demand balance: Both OPEC and non-OPEC have experienced substantial production cuts from May to June this year. The total global production cuts have reached 14.5 million barrels per day, mainly because the OPEC+ production reduction agreement came into effect in May and has been well implemented. On the other hand, non-OPEC also experienced a significant passive production cut due to low oil prices. However, in terms of supply outlook, we believe that the low point of supply for the whole year will be in June, and that supply will also recover following demand from July.

Crude oil price: There is a risk of callback in the short term, but the oil price operation center moves up. Neutral, we think the current oil price rebounds too fast and there is a risk of short-term pullback. In the medium term, we believe that if the inventory degassing is relatively smooth, the oil price is expected to run at the center of $30-50 per barrel. Due to the large global inventory and OPEC remaining capacity constraints, we expect that it will be more difficult to break through $50 per barrel unless there is a black swan geopolitical event.
Risk points: the second outbreak of the epidemic, the geopolitical black swan incident.

Iron Ore

The position on I2009 contract increased by 533 lots and closed at ¥771 per ton, the position on I2101 contract decreased by 189 lots and closed at ¥691.5 per ton.

【Important Information】

1. In May, Brazil exported a total of 21.46 million tons of iron ore, a decrease of 28% from the same period last year. In that month, Brazil exported the most iron ore to China, at 14.87 million tons, followed by Malaysia, which exported 2.31 million tons, and exported 1.16 million tons of iron ore to Oman. From January to May, the total export of Brazilian iron ore was 115 million tons, a year-on-year decrease of 13.4%. Among them, 75.36 million tons of iron ore were exported to China, 8.89 million tons were exported to Malaysia, and 5 million tons and 4.32 million tons were exported to Japan and the Netherlands, respectively.
2. From January to May, the national real estate development investment was 459.2 billion yuan, a year-on-year decrease of 0.3%, a decrease of 3.0 percentage points from January to April. Among them, residential investment was 3,376.5 billion yuan, which was flat year-on-year and fell 2.8% from January to April.
3. The total arrival volume of 45 ports across the country was 20.916 million tons, a decrease of 2.839 million tons from the previous month; the total arrival volume of the six ports in the north was 8.824 million tons, a decrease of 4.055 million tons. The total of 26 ports across the country reached 19.835 million tons, a decrease of 2.563 million tons from the previous month.

4. In terms of spot, the PB powder in Rizhao Port is ¥782 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥837 per ton.

【Trading Strategy】

1. Arbitrage: Recently, the total inventory of iron ore has accumulated slightly, and the pressure on ports has increased significantly. The port inventory has shown a slight downward trend. This week, the overall shipments of Australia and Brazil have declined. Australia’s global shipments have fallen significantly, but the shipments to China have experienced a limited decrease in month-on-month. Shipments in June from Australia increased more in a short period of time. In the later stages, there may be accumulation, and the demand for building materials is currently weakening seasonally. However, the current basis is also large. It is recommended to wait and see in the short term,

2. The short-term spot upward drive is weakened, but the basis is still large. It is recommended to wait and see. (For reference only)

PTA

PTA inventory is at a high historical level, focusing on manufacturers' active or passive maintenance to regulate PTA supply

Prospects of the balance sheet: follow-up maintenance expectations and large swings in production, two separate hypothesis estimates. (1) The maintenance of Yisheng, Tongkun and Zhongtai did not materialize, and Hengli put into production in July-August. It went to the warehouse on average in June-July and quickly accumulated in August. (2) Yisheng, Tongkun and Zhongtai were overhauled in July-August, Hengli put into production in July-August, the average mid-range went to the warehouse from June-July, and accumulated slightly in August. At present, the profit of PTA processing is relatively high, and it pays attention to the status of the overhaul of major factories. In terms of operation, it is advised to wait and see for unilateral strategy; for the strategy across varieties, it is estimated that PTA in June to July will remove a small amount of warehouse, and cross-variety will be slightly stronger; for strategy across period, under the background of high PTA processing profits, the maintenance and cashing may be small. The June-July period tends to remove warehouse slightly. However, the absolute high inventory level is still pressing across the period; after the subsequent PTA processing profits are depressed, the probability of maintenance and cashing increases, then tend to remove warehouse quickly in July. At that time, the inter-period rebound will bottom out. It is advised to focus on the risks of the possibility of maintenance under the high production concentration of the PTA plant; the downstream restock space and the demand recovery rate of the external market.

Natural Rubber

Overseas rubber fluctuated weakly. The main force contract of TF09 fell by 1.8 or 1.48% and closed at 120.0. The main force contract of JRU10 fell by 4.7 or 2.96% and closed at 154.3. The SHFE rubber rebounded slightly. The main force contract of RU09 rose by 50 or 0.49% and closed at 10,260, and the main force contract of NR09 rose by 70 or 0.81% and closed at 8,710. The quoted price for Qingdao rubber in USD fell by $5 per ton with general offers. The quoted price of RSS3 was $1,390 per ton. The spot price or CIF of STR20 was $1,220 to $1,235 per ton. The CIF of SMR20 in August was $1,250 per ton. The CIF of mixed rubber from Thailand in October was $1,260 per ton.

Autohome: Mercedes-Benz's Hambach plant in France started operations in early June. Since then, all Mercedes-Benz factories around the world have resumed work. While restarting production, Mercedes-Benz will still take strict anti-epidemic measures to ensure the health and safety of factory employees. In response to the inconvenience caused by the epidemic, Mercedes-Benz has launched a caring policy for users around the world, including extending customers’ original car warranty time, testing before the warranty expires, original factory warranty extension packages and other services and rights to ensure the normality of the terminal run.

Recently, there have been rainfalls in all major producing provinces in Thailand. The daily average rainfall throughout the territory reached 9.64mm, which was higher than the average of 6.82mm over the same period. Attention should be paid to the increase in rainfall in Southeast Asia. The purchase price of concentrated latex in the Hainan region has increased to 14000-14100 yuan/ton, and the total latex for premium water is nearly 5200 yuan/ton or 57.9%.

Futures Operation Advice: The SHFE rubber rebounded slightly over evening session. It is advised to pay attention to the support at the bottom recently. (For reference only)