Yesterday, Saudi Aramco announced the official September crude oil export price. Among them, the Saudi Arabian Lightweight Asia Pacific discount was adjusted by 0.3 US dollars per barrel, while the previous market expectation was lowered by 0.5 to 1 US dollars per barrel. Because of the weakening of the Dubai M1-M3 spread, the current decline in Saudi discount is smaller than market expectations. We believe that this reflects Saudi Arabia’s willingness to control export prices. On the other hand, from the buyer’s point of view, since the OSP discount does not have much discount, the direction of crude oil procurement will shift from the Middle East to the Atlantic Basin oil types such as the United States, West Africa, and the Mediterranean.. Turning to the Atlantic Basin oil types such as the United States, West Africa, and the Mediterranean, Dubai's monthly spread may weaken further. In addition, we need to pay attention to the trend of the U.S. dollar in the near future. The U.S. dollar has continued to weaken since July to hedge some of the negative aspects of crude oil fundamentals. However, if it is priced in euros or other currencies, crude oil has experienced a round of decline. The recent market is still pessimistic about the trend of the dollar. Need to pay attention to the upside risk of oil prices brought by the sharp depreciation of the US dollar.
Strategy: Neutral and bearish relatively, reverse cash and carry arbitrage strategy on Brent, long the sixth lines and short the first line
Risk: Supply disruption caused by sudden geopolitical events, dollar depreciation.
The position on I2009 contract decreased by 35,230 lots and closed at ¥903.5 per ton, the position on I2101 contract increased by 11,853 lots and closed at ¥825 per ton.
1. Ministry of Finance: It will appropriately increase the deficit rate, which sent a clear positive signal. Raise the fiscal deficit rate from 2.8% to over 3.6%, and the deficit will increase by 1 trillion yuan from 2019 to 3.76 trillion yuan, stabilizing and boosting market confidence; it will also increase tax and fee reduction efforts to hedge against business difficulties.
2. The Ministry of Finance issued the "Report on the Implementation of China's Fiscal Policy in the First Half of 2020" on the 6th, showing that as of July 31, the newly-added local government special bonds in 2020 had issued 2,266.1 billion yuan, completing 60.4% of the annual plan (3,750 billion yuan). The issuance and use of special bonds for local governments have been accelerated to better play the role of stimulating the economy.
3. From January to June, private steel companies produced 309 million tons of crude steel, accounting for 62% of the country’s crude steel output, a year-on-year increase of 1.3%; cumulative production of steel products was 423 million tons, accounting for 70% of the country’s steel output, a year-on-year increase of 2.65%.
4. In terms of spot, the PB powder in Rizhao Port is ¥905 per ton, and the golden bubba in Rizhao Port is equivalent to ¥950 per ton.
1. Arbitrage: This week, the port inventory dropped slightly, and the pressure port increased slightly. The overall change was little. Port dredging and pig iron production increased slightly, and demand continued to remain high. Recently, Australia and Brazil are still undergoing maintenance. Shipment is expected to be difficult to increase, and pig iron production is high. It is expected that the overall inventory will hardly have cumulative pressure. Coarse flour is still dropping. On Tuesday, the inventory of different varieties is still dropping, and the price difference between PB and golden bubba is also at a high level. The structural problem has not been alleviated. The market standard is still strong. The demand for building materials has also improved significantly recently. The inventory began to decline, which led to a further improvement in market sentiment of iron ore. It is recommended to maintain the 9-1 iron ore cash and carry arbitrage strategy.
2. Option strategy: The market is still relatively strong. It is recommended to sell I2009-P-870. (For reference only)
PTA: The overhaul has increased again, and the terminal weaving texturing load has continued to improve and rebound
The marginal improvement of weekly TA overhaul concentration rebounded; however, from the monthly frequency, it was still weak. If the Yisheng overhaul was not realized, the inventory will continue to accumulate in August; if the Yisheng overhaul was realized, the inventory will be flat in August, while the inventory level was still high. In terms of the unilateral strategy, it is advised to be neutral and bearish relatively; 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 RU01 rose by 155 or 1.24% and closed at 12,605. The main force contract of JRU01 rose by 1.6 or 0.94% and closed at 171.3. Yunnan WF closed at 10,700 to 10,850 yuan per ton, Hainan SCRWF closed at 10,750 yuan per ton, the second standard rubber closed at 10,500 yuan per ton, and Thailand’s RSS3 closed at 13,150 to 13,250 yuan per ton.
NR: The main force contract of NR10 rose by 255 or 2.69% and closed at 9,740. The main force contract of TF12 rose by 4.0 or 3.08% closed at 133.7. The quoted price for Qingdao rubber in USD rebounded by $5 to $20 per ton with general inquiries. The spot price or CIF of STR20 was $1,330 to $1,340 per ton. The CIF of SMR20 in December was $1,370 per ton. The CIF of mixed rubber from Thailand in December was $1,370 to $1,380 per ton.
Citing News from Sri Trang Agro-Industry Plc.: Iran is considering increasing investment to expand local tire production capacity. A person in charge of the Ministry of Defense of the country said that Iran now has a huge transportation fleet and consumes a lot of tires. According to him, the Iranian government has approved part of the land as a tire production site. The new investment will play an important role in updating production equipment and launching development projects. Data show that in the first quarter of this year, Iran’s tire production was 67,734 tons, a year-on-year increase of 24%.
The domestic production area in Yunnan is rainy and the supply is tight. The latex is reported to be 9,900 to 10,200 yuan per ton, and all latex processing is profitable. Orders for concentrated latex in Hainan are still being processed, and the premium of latex price for concentrated latex in terms of SCRWF was 800 to 900 yuan per ton. According to Zhuo Chuang's statistics, the domestic all-steel operating rate was 73.3%, the week-on-week (relative) production increase was 2.5%, and the year-on-year (relative) production increase was 6.1%. If the operating rate can be maintained, the monthly year-on-year change will change from a -10.3% reduction in output in July to an increase in output of +9.8%, and the operation is good.
Futures Operation Advice: For the main RU01 contract, it is advised to wait and see, and focus on the support at the rencent high level at 12,460. (For reference only).