Crude oil

OPEC+ is still committed to improving the compliance rate. According to its latest statement, countries that had previously cheated in production cuts must make up from August to September. This amount is close to 800,000 barrels per day, which will hedge some of OPEC’s future. The impact of increased production, considering the recent failure of Libya to restart, so OPEC will be more inclined to increase production by 1.9 million barrels per day at this meeting. In July, due to the cancellation of 1.2 million barrels/day of voluntary production reduction in Saudi Arabia, Kuwait and the UAE, output is also expected to increase from June. Looking at the situation of superimposing at least crude oil power generation in the Middle East and Venezuela’s production cuts, we expect OPEC exports to increase by about 1 to 1.5 million barrels/day in August compared to June. Considering the peak season for crude oil demand in the third quarter, this part of the supply increase will not cause too much impact on the market. In terms of operation, it is advised to maintain the neutral strategy.

Iron Ore

The position on I2009 contract decreased by 30,361 lots and closed at ¥829 per ton, the position on I2101 contract increased by 2,243 lots and closed at ¥734 per ton.

【Important Information】

1. South Korean customs data show that in June, South Korea imported a total of 4.9028 million tons of iron ore, a decrease of 21.83% year-on-year and an increase of 3.32% month-on-month. In the month, South Korea imported the most iron ore from Australia at 4.144 million tons, a year-on-year decrease of 14.8% and a month-on-month increase of 20.56%; followed by Brazil, with an import volume of 448,700 tons, a substantial increase of nearly 1.5 times year-on-year, but a decrease of 46.69% month-on-month; Imported 165,000 tons and 147,000 tons of iron ore from South Africa and Canada, respectively.

2. According to data from the General Administration of Customs, China’s imports of iron ore in June 2020 were 101.682 million tons, an increase of 14.662 million tons from the previous month and an increase of 26.503 million tons year-on-year; China’s cumulative iron ore imports from January to June was 54.697 million tons, an increase of 9.33% year-on-year.

3. In terms of spot, the PB powder in Rizhao Port is ¥838 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥896 per ton.

【Trading Strategy】

1. Arbitrage: This week, stocks at Port 15 increased by 260,000 tons, and powder ore stocks increased by 440,000 tons. Stocks accumulated slightly. Recently, shipments in Australia and Brazil have declined. Supply pressures continue to ease. The drop in pig iron is not yet obvious. It is necessary to continue to observe the strength of the recovery of demand for building materials after the rainy season. The rebound in demand will support the production of pig iron. The downside of iron ore demand may be limited. The spot is expected to run strongly, and the basis is still large. It is recommended to cash and carry arbitrage on 2101-2105.

2. Option strategy: It is recommended to consider selling 2009 put options, that is I2009-P-750. (For reference only)

PTA

Polyester production and sales are picking up, but accumulating pressure remains

In the context of PTA still having processing profits, the possibility of additional overhauls at Yisheng and Tongkun has decreased, combined with the reduction in polyester production, which quickly accumulated in July to August. 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. The performance of the cross-species may be weak, but the willingness of the upstream factory to maintain and control should still be judged based on the change in processing fees; for strategy across period, Yisheng Tongkun's July-August maintenance assumptions are still high after cashing. 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.

Natural Rubber

About RU: The main force contract of RU09 rose by 20 or 0.19% and closed at 10,620, The main force contract of JRU10 fell by 0.5 or 0.32% and closed at 156.3. Yunnan WF closed at 10,350-10,500 yuan/ton, Hainan Whole Milk closed at 10,400 yuan/ton, the second landmark of production closed at 10,100 yuan/ton, and Thailand’s tobacco tablets closed at 12,700-12,800 yuan/ton.

About NR: The main force contract of NR09 rose by 40 or 0.46% and closed at 8,815. The main force contract of TF09 fell by 0.8 or 0.66% closed at 120.0. The quoted price for Qingdao rubber in USD was narrowed with general inquiries. The spot price or CIF of STR20 was $1,250 to $1,265 per ton. The CIF of SMR20 in November was $1300 per ton. The CIF of mixed rubber from Thailand in December was $1310 per ton.

China Rubber News: The Indian government said on Monday that it will impose a 10% import tariff on South Korean polybutadiene rubber to support local producers. Previously, duty-free imports from South Korea were allowed under bilateral agreements. The government stated that the 10% tariff will take effect before January 28, 2021. This move may increase the production cost of tire manufacturers in the country, but it will help polybutadiene rubber manufacturers.

In terms of synthetic rubber, the Qilu Shunding plant plans to stop, and the vacant demand will be supplemented by other brands. The price gap between brands is reasonable. Multi-caliber data shows that inventory clearance in Qingdao Free Trade Zone is difficult and has been consolidating for the fourth consecutive week. The latest weekly inventory is slightly accumulating, and the current inventory outside the district is about 655,000 tons.

Futures Operation Advice: For the main force contract of RU09, it is advised to hold large volumes in short term and stop loss should be set at the early low of 10,520 points. (For reference only)