Oil prices have recently fluctuated around $40 per barrel. Prior to this, the market's expected phase adjustment failed to appear. Although China's crude oil procurement has slowed, OPEC+ production restrictions have kept supply tight, and the margin of supply and demand is still in a tight balance. Crude oil inventories have begun to degrade from floating warehouses, while crude oil discounts have remained relatively strong. The curve is close to flat. But looking ahead, the oil market will shift from a weak supply to a strong demand.
From a supply point of view, we believe that June is already the low point of annual production. OPEC output fell to 22.6 million barrels/day in June, and exports fell below 18 million barrels/day, the lowest point since the 1990s. The production volume of Russia has also dropped to 9.4 million barrels/day. The crude oil output after excluding condensate is about 8.5 million barrels/day. The export volume of its flagship crude Ural crude oil also fell below 800,000 barrels/day in July. In terms of non-OPEC, the number of rigs and fracturing units in the United States fell by more than 70%, and its output fell from 12.6 million barrels/day to about 10.5 million barrels/day. Canadian output also fell by nearly 1.5 million barrels/day. Brazil and Norway and other countries There are also production cuts of different magnitudes. But looking back, we believe that the low point of production has passed, and the trend of future supply recovery is relatively certain. For OPEC, the 1.2 million barrels/day voluntary production reduction in Saudi Arabia, the UAE and Kuwait will be cancelled from July, and Libya is also planning to resume crude oil production and exports recently. In addition, according to OPEC's previous production reduction plan, the scale of production reduction from August to 7.7 million barrels per day will be reduced to 7.7 million barrels per day. Whether or not to reduce production as scheduled will be decided at the ministerial video conference on July 15. Although at present, due to Saudi Arabia's emphasis on compliance rates, countries such as Iraq and Nigeria may further reduce production, but we are still skeptical about the implementation of production cuts in these cheating countries. It is worth mentioning that Venezuela, due to further tightening of US sanctions, Venezuela’s output fell to 340,000 barrels/day in June, and exports fell below 200,000 barrels/day. In the future, Venezuela’s output and exports will further decline, but the total output of OPEC Has little effect. Instead of OPEC, major shale oil producers in the United States have begun to resume production gradually. According to the statements of major companies, it is expected that U.S. production will return to 500,000 barrels/day in July, mainly from previously drilled but uncompleted wells. (DUC) production capacity is released, we believe that the number of fracturing units will rebound faster than the number of rigs in the future. On the Canadian side, with the end of the overhaul of the oil sand processing plant in the second quarter and the rebound in oil prices, it is expected that its output will gradually recover from its low point.
From the demand side, the recent strength of China's crude oil procurement has slowed down significantly. Judging from the shipping schedule data, the volume of arrivals from July to August declined, the lack of crude oil tank space and the disappearance of the floor price dividend will make crude oil imports return to normalization, but due to overbought in the second quarter, there is no doubt that it will overdraw some of the demand in the third quarter. China's buying interest has eased and other global refineries have taken a breather. Recently, global refinery profits have rebounded, and the price difference between refined oil cracking has rebounded with the end of the closure, but the refineries still face greater operating pressure, especially the current The global inventory of middle distillates is high, and the resumption of refineries is still very slow. It is still doubtful whether other countries can take over the baton of demand from China.
The current crude oil market is still in a fragile equilibrium stage. China’s buying interest has slowed, European refineries have digested floating positions in the North Sea and West Africa, and U.S. imports have declined. However, countries other than China in the Asia-Pacific region have increased U.S. procurement to make up for the Middle East gap. The crude oil market is on a crossroads. We believe that the current US crude oil exports and the marginal changes in US crude oil inventories are the most important observation indicators. In terms of operation, it is advised to maintain the neutral strategy.
The position on I2009 contract increased by 2,694 lots and closed at ¥747 per ton, the position on I2101 contract increased by 44 lots and closed at ¥675.5 per ton.
1. According to foreign media reports, Indian steel company JSW said in its 2019-2020 annual report that it was delayed by several ongoing expansion plans due to the impact of Covid-19. At the Dolvi Works, the company has been approved to resume project construction in late April 2020, which allows it to expand its existing business. However, the shortage of labor has hindered the progress of the annual capacity expansion project of 5 million tons.
2. According to data from the "Ukrainian Metal Industry Entrepreneurs Association", from January to June 2020, Ukraine's steel output was 10.1 million tons, a year-on-year decrease of 7.6%. Pig iron was 9.98 million tons (down 2.6% year-on-year), crude steel 10.1 million tons (down 7.6%), and steel 9.02 million tons (down 4.7%). In 2019, Ukraine produced 20.6 million tons of pig iron (down 2.4% year-on-year), 20.85 million tons of crude steel (down 1.2%), and 18.2 million tons of steel (down 0.9%).
3. In terms of spot, the PB powder in Rizhao Port is ¥765 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥821 per ton.
1. Arbitrage: In the past two weeks, there has been a significant accumulation of port stocks in the pressurized port, and there is a sign of pig iron peaking. The overall supply and demand of iron ore spot has weakened, but by category, the cumulative range of lump ore and pellets is relatively large. The stock of fine ore still has a significant decline, and the counterparts on the disk are still relatively strong. At present, rainfall is still suppressing the demand for building materials. It is still necessary to observe the strength of terminal demand recovery after the rainy season. It is advised to reduce or close the position of longing contract of 2101 of hot rolled and shorting contract of 2009 of iron ore.
2. Option strategy: It is recommended to consider selling 2009 call options, that is I2009-C-800. (For reference only)
Terminal demand is still weak, polyester production and sales are weak, and polyester inventory is accumulating.
Prospects of the balance sheet: follow-up maintenance expectations and large swings in production, two separate hypothesis estimates. 1) Yisheng and Tongkun have carried out additional maintenance, and continued to remove the warehouse slightly in July. The nodes that accumulated inventory moved to August. (2) The additional overhauls of Yisheng and Tongkun failed to be fulfilled, so they ended removing a small amount of warehouse in June and re-entered the accumulation phase in July. 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 July will accumulate a small amount of warehouse. Chemical products are generally in the accumulation phase in July, and PTA has no obvious difference in strength, but it pays attention to the willingness of upstream factories to maintain and control under the background of low processing fees; for strategy across period, Yisheng Tongkun's maintenance expectations in July-August assume that the inventory level after de-stocking is still high, the warehouse receipt pressure is still there, and maintains expectations of selling 2009 and buying 2101. It is advised to wait and see, as well as focus on PTA factory inspection and fulfillment wishes of July to August, and the downstream restocking space.
About RU: The main force contract of RU09 fell high by 40 or 0.38% and closed at 10,445, The main force contract of JRU10 rose by 0.2 or 0.13% and closed at 155.6. Yunnan WF closed at 10,100-10,300 yuan/ton, Hainan Whole Milk closed at 10,200 yuan/ton, the second landmark of production closed at 10,000 yuan/ton, and Thailand’s tobacco tablets closed at 12,500-12,600 yuan/ton.
About NR: The main force contract of NR09 fell by 80 or 0.90% and closed at 8,780. The main force contract of TF09 rose by 1.6 or 1.36% and closed at 119.6. The quoted price for Qingdao rubber in USD rose slightly by $5-$10 per ton with general inquiries. The spot price or CIF of STR20 was $1,240 to $1,250 per ton. The CIF of SMR20 in November was $1285 per ton. The CIF of mixed rubber from Thailand in November was $1270 per ton.
First Commercial Vehicle Network: In June, the Chinese heavy truck market is expected to sell about 165,000 vehicles of various types, down 8% month-on-month and up 59% year-on-year. From January to June, the cumulative sales of the heavy truck market were approximately 810,000 units, a cumulative increase of 23% year-on-year.
At the beginning of July, the average daily rainfall of the major producing provinces in Thailand reached 7.39mm, which is equivalent to the historical average of 7.68mm. The latest RU inventory subtotal-futures is 0.9 million tons, a year-on-year (relative) decrease of 53.3%; NR is removed from the warehouse, and the proportion of Thai standards gradually decreases. In terms of heavy trucks, the most important factor supporting the growth of sales in the heavy truck market in the second quarter and even the whole year is the policy of early elimination of National Three trucks.
Futures Operation Advice: RU will change month soon. It is advised to hold the main force contract of RU09 with large quantities in the short term and stop the loss at early low of 10,300 points below. (For reference only)