Crude Oil

Last week, international oil prices fell, but domestic prices were weaker. However, from the perspective of the price relationship between the domestic market and the lowest available oil product, Pakistan Light, the current CFR (sulfur content discount) between the domestic market and Pakistan Light is close to the same level. The arbitrage window is closed. We believe that the main reasons why the internal market is weaker than the external market are: 1. Recently, Dubai/Oman is weaker than Brent in both unilateral and monthly differences; 2. The spot discount of Pakistan Light has fallen; 3. The domestic warehouse receipts are sufficient for delivery. The apparent storage capacity exceeds 70%, and the refinery's early overbought has led to weak demand and it is unlikely to buy goods from the disk in the short term. We believe that the current spread of crude oil futures is still at a relatively reasonable level. The current internal market mainly reflects the logic of weak spot, that is, the current Middle East sour oil market has turned from its previous strength to weakness. The factors behind this are in our previous weekly reports. There are also more analyses. On the one hand, the market expects that OPEC including Russia will increase exports from August, and the OSP will be adjusted downwards following the spot discount (the current Russian August shipment plan has clearly increased relative to July). On the other hand, China's own demand is weak, lack of buying interest combined with serious short-term buying interest in ports stagnated. From the current point of view, we believe that the recent weak spot in the Middle East is difficult to change.

From the perspective of INE's crude oil warehouse receipts, due to the lucrative import profits opened in the April to May arbitrage window, the superimposed exchanges to expand the delivery warehouse and increase storage fees, the number of crude oil warehouse receipts has increased significantly. The current crude oil storage capacity is 60.6 million barrels. The number of warehouse receipts is 45.29 million barrels, accounting for more than 70%. In addition, there are hidden warehouse receipt resources for spot filing. How to digest the amount of warehouse receipts in the future has become a key issue in the later stage. From the demand side, at present, domestic refineries are not short of oil, whether they are main operations or large-scale purchases in the early stage of the refinery. It is unlikely to buy warehouse receipts from the disk or directly. And judging from the situation in July, China exported a shipment of warehouse receipts from Qingdao to Oman to a South Korean refinery, so the short-term digestion route may come from foreign Japanese and Korean refineries, because they no matter which delivery warehouse they extract oil from. For them there is not much difference. The domestic price of domestic oil transportation is higher, and refineries must consider the logistics cost of off-site warehouse receipts. Therefore, the current domestic Oman crude oil warehouse receipts will be more favored by foreign refineries. Judging from the weekly inventory report released by the exchange, the current Oman warehouse receipts are roughly 9 million barrels. We think this part of the warehouse receipts may be digested first, but the digestion time of other oil types in the delivery warehouse such as Basra and Upper Zakum will be longer. long. From the perspective of storage fees, although the crisis of storage capacity limit has been lifted from a global perspective, it currently reflects that the storage capacity of onshore storage is still tight, and the storage capacity of ports in China is still very tight due to the overbought crude oil in the early period. Therefore, we expect crude oil storage in the near future. The probability of downward adjustment of fees is unlikely.

Strategy: Neutral and bearish relatively, Brent reverses, buys six lines and throws the first line

Risk: Supply disruption caused by sudden geopolitical events.

Iron Ore

The position on I2009 contract decreased by 3,233 lots and closed at ¥849.5 per ton, the position on I2101 contract increased by 12,307 lots and closed at ¥766 per ton.

【Important Information】

1. According to the latest data obtained by the first commercial vehicle network, in July 2020, my country's heavy truck market is expected to sell more than 140,000 vehicles of various types, down 16% month-on-month and up 89% year-on-year. This increase also means that the average monthly increase in the sales of heavy trucks in April, May, June and July reached about 70%. The data of over 140,000 vehicles also created a new high in July sales in the heavy truck industry, which was more than 50,000 more than the previous historical record of 90,200 vehicles in July 2017.

2. According to data released by the China Association of Metallurgical and Mining Enterprises on July 31, the national production of iron ore concentrate in June was 23.771 million tons, an increase of 2.7% year-on-year and a month-on-month increase of 0.8%; from January to June, the production of iron ore concentrate was 130 million tons, a year-on-year decrease 0.3%.

3. In terms of spot, the PB powder in Rizhao Port is ¥855 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥900 per ton.

【Trading Strategy】

1. Arbitrage: At present, the demand for iron ore remains high. Australia’s recent arrival pressure is expected to decrease. The short-term overall inventory pressure is expected to be limited. The structural contradiction has not been resolved. The price difference between PB and golden Bubba is still large, and golden Bubba inventory is still falling. The golden Bubba inventory is still declining. The pressure has not yet been clearly manifested, and there is still a certain basis in 09. It is recommended to cash and carry arbitrage iron ore with light positions.

2. Option strategy: There is still a certain margin in the recent month contracts. It is recommended to sell I2009-P-820 instead. (For reference only)

PTA

Overhaul began to materialize, terminal weaving texturing is still improving

Prospects of balance sheet: 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.

Natural Rubber

RU: The main force completes the month change. The main force contract of RU01 fell by 70 or 0.58% and closed at 12,025. The main force contract of JRU10 fell by 1.2 or 0.73% and closed at 163.6. Yunnan WF closed at 10,650 to 10,700 yuan/ton, Hainan SCRWF closed at 10,700 yuan/ton, the second standard rubber closed at 10,600 yuan/ton, and Thailand’s RSS3 closed at 13,050 yuan/ton.

NR: The main force contract of NR10 rose by 30 or 0.34% and closed at 8,965. Singapore is closed for Eid al-Adha. The quoted price for Qingdao rubber in USD fell by 5 dollar/ton with normal inquiries. The spot price or CIF of STR20 was $1,285 to $1,290 per ton. The CIF of SMR20 in December was $1,305 to @1 ,310 per ton. The CIF of mixed rubber from Thailand in December was $1,320 per ton.

TireWorld.com: Recently, Goodyear Tire released its second-quarter financial report and first-half financial report. Data show that from April to June, Goodyear's sales fell 41% to 2.14 billion dollars; net loss was 696 million dollars, and net profit in the same period last year was 54 million dollars. From January to June, sales fell 28% overall to $5.2 billion; net loss was $1.3 billion, compared to $7 million in the same period last year. The Chairman of Goodyear said that the second quarter of this year was the most challenging quarter in the company's history. He attributed the poor performance to the poor tire market, which led to a decline in sales.

The local market was closed on the occasion of Myanmar's summer festival. In the past July, the rainfall in Thailand was normal, and the average daily rainfall in the main production houses reached 7.78mm, which is very close to the historical average of 7.69mm. RU contracts and NR contract warehouse receipts are de-stocked at the same time: RU stock futures are at 224,000 tons, a decrease of 6,000 tons; NR stock futures are at 34,000 tons, a decrease of 3,000 tons.

Futures Operation Advice: As for the main RU01 contract, it is advised to pay attention to the support at the previous high of 11,900 points. (For reference only).