China’s crude oil import data for June released last week reached 13 million barrels per day, a year-on-year increase of 3.3 million barrels per day, setting a historical record. This was basically within the previous market’s expectations, mainly because Chinese refineries in April to May was overbought during the trading period of China, but due to overdraft of future demand and crude oil import quotas and insufficient turnover of domestic storage terminals (in addition to market factors such as decline in refinery profits and weak demand for refined oil), China’s crude oil buying momentum is insufficient.
Judging from the breakdown of import data, among the 3.3 million barrels per day increase in imports in June, the main business increased by about 1.5 million barrels per day, and Hengli/Zhejiang Petrochemical increased by about 600,000 barrels per day. Local refineries Imports increased by 1.2 million barrels per day. Generally speaking, affected by the domestic product oil floor price policy, refineries have a strong willingness to purchase low-price crude oil. Different types of refineries have increased their crude oil purchases significantly. Hengli and Zhejiang Petrochemical are more of a rigid demand brought about by the commissioning of the new refinery. Since the beginning of this year, the combined average import volume of the two has been about 500,000 to 1 million barrels per day, which basically matches the combined processing capacity of the two. Local refineries’ import increments from January to April this year were basically tepid, but they increased significantly from May to June. This was mainly driven by speculative imports under floor prices. However, considering that many refineries’ crude oil import quota has been used up in the round of imports, and the room for increasing imports in the future will be very limited. The crude oil use quota of the Development and Reform Commission basically determines the crude oil import upper limit of a private refinery. The crude oil import quota of the Ministry of Commerce is unlikely to exceed the use quota. Tight quotas may become the market norm in the second half of this year. However, we have also noticed that the imports of diluted bitumen have increased substantially since May. When quotas are tight, private refineries may increase imports through channels such as diluted bitumen or straight-run fuel oil. The overall operating rate of private refineries reached a historical high of more than 75% in June, which also means that the increased import consumption caused by the high operating rate is rigid demand, but as crude oil rises to $40 per barrel, the floor price dividend disappears. The operating rate of the local refinery has begun to fall from a high level, and the recent high inventory of diesel in Shandong refineries has continued to suppress the operating rate of the refinery. We believe that the demand for crude oil imports from local refineries will be weak for at least the third quarter. Finally, look at the main refineries. The main refineries accounted for the largest proportion of the import increase in June, but their operating rate performance is significantly weaker than that of the private refineries. The main reason is that the risk and return funds have to be handed over to the country to suppress in the future, we believe that the operating rate of the main business will remain at 70~80%, but the export space of refined oil may be dragged down by external demand. If the recovery of external demand is too slow, we do not rule out the main refinery and private is in roll again, but taking into account the rigid demand brought about by the Zhongke refinery in June this year, it is partially hedged to the effect of the decline of some speculative buying.
In general, we believe that starting from August, China’s total crude oil imports will slow down year-on-year. From the perspective of discounts, the discounts for oils directly related to China’s demand such as ESPO, Oman and Angola crude oil discounts have weakened significantly. Dubai M2-M3 also switched from Back to Contango, and the slowdown in China's demand is turning from a hidden worry to a reality.
Strategy: Neutral and bearish relatively, no strategy suggestion yet
Risk: Supply disruption caused by geopolitical events.
The position on I2009 contract increased by 1,104 lots and closed at ¥829 per ton, the position on I2101 contract decreased by 4,043 lots and closed at ¥746.5 per ton.
1. Wind data shows that from July 20 to 24, 827.7 billion yuan of funds expired in the open market, and the central bank conducted a total of 160 billion yuan of reverse repurchase and 50 billion yuan of treasury cash deposit operations. Therefore, a net return of 617.7 billion yuan this week. Market participants believe that with the gradual return of monetary policy to normalization, the probability of subsequent liquidity tightening is unlikely.
2. According to preliminary data released by the Australian Bureau of Statistics on Friday, Australia's iron ore exports to China increased by 8% to 9.92 billion Australian dollars in June, setting a record for the highest monthly export value in history. It is reported that iron ore is Australia’s largest export commodity, and China accounts for nearly 90% of Australia’s total iron ore exports. According to Australia’s financial report last year, the total value of iron ore exports rose to more than 100 billion Australian dollars, accounting for more than a quarter of Australia’s total exports.
3. In terms of spot, the PB powder in Rizhao Port is ¥840 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥882 per ton.
1. Arbitrage: The recent port inventory and pressure on the port have significantly accumulated. The overall rigid demand for iron ore is still high. The recent shipments in the continent are in line with the seasonal decline, and the overall arrival pressure is expected to ease in the later period. However, due to the relatively high cumulative port pressure in the previous period, it is expected that the port inventory will not decline significantly when the port pressure has eased, and the current price gap between card powder and PB has narrowed. The upward drive of the spot is weakened, it is advised to hold a slight position on long 01 hot rolled and short 01 iron ore.
2. Option strategy: The upward drive of iron ore has weakened, but there is still a certain margin. It is recommended to wait and see. (For reference only)
The terminal operating rate increased, and polyester’s inventory accumulated speed slow down.
In the context of PTA still having processing profits, the possibility of additional overhaul at Yisheng is uncertain. The inventory will accumulate if the overhaul doesn’t happen, and will not accumulate if it happens, while the inventory still remains at high level. In terms of the unilateral strategy, it is expected to fall gradually; for the strategy across varieties, it is estimated that possibility of overhaul of PTA in August is still large. 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, the 9-1 reverse cash and carry strategy was under pressure and close to the rolling window at -200. 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.
RU: The main force contract of RU09 rose by 105 or 1.00% and closed at 10,640. The Japan market was closed due to the sports day. Yunnan WF closed at 10,550 to 10,600 yuan/ton, Hainan SCRWF closed at 10,600 yuan/ton, the second standard rubber closed at 10,250 yuan/ton, and Thailand’s RSS3 closed at 12,850 to 12,950 yuan/ton.
NR: The main force contract of NR10 rose by 120 or 1.39% and closed at 8,730. The main force contract of TF10 fell by 0.3 or 0.25% closed at 121.0. The quoted price for Qingdao rubber in USD fell slightly by $5 per ton with few inquiries. The spot price or CIF of STR20 was $1,245 per ton. The CIF of SMR20 in November was $1,290 per ton. The CIF of mixed rubber from Thailand in December was $1,300 per ton.
Thailand Customs data: Thailand's natural rubber exports in June were 331,100 tons (including latex and mixed rubber), an increase of 4,700 tons or 1.44% month-on-month and an increase of 2.27% year-on-year. Among them, the export of mixed rubber was 171,100 tons, an increase of 15.67% month-on-month and an increase of 450.16% year-on-year; the export volume of dry rubber was 78,700 tons, a decrease of 20,400 tons or 10.36% from the previous month; the export volume of latex was 80,400 tons, a decrease of 10,300 tons from the previous month Or 11.35%. From January to June, Thailand's total export volume of natural rubber was 2,222,600 tons, a year-on-year decrease of 4.05%.
Rainfall in Thailand is normal, and moderate to heavy rains have been observed in all major production provinces. The average daily rainfall in July is 6.59mm, which is equivalent to the historical average of 7.65mm. The latest RU inventory subtotal was de-stocked by 2.1% on a week-on-week basis to 238,000 tons, and inventory futures were 230 thousand tons. The difference between the subtotal and futures fell to 8,000 tons, a year-on-year decrease of 76.4%, which is close to the lowest value in the same period in 10 years.
Futures Operation Advice: The main contract is rolling. For the sub-main RU01 contract, it is advised to long it and set a stop at the previous low level at 11,690. (For reference only).