Crude Oil

Last week, OPEC's July crude oil data and China's July crude oil import data were released. Saudi Arabia's official September OSP price was also the focus of market attention. Firstly, looking at OPEC’s July export data, according to Kpler’s shipping schedule statistics, OPEC’s crude oil exports in July increased by 550,000 barrels per day to 17.76 million barrels per day, of which the UAE increased by 410,000 barrels per day and Saudi Arabia’s increased by 170,000 barrels. /Day, Kuwait increased by 160,000 barrels/day, and Venezuela increased by 110,000 barrels/day. The increase in exports in July mainly reflected the cancellation of the voluntary production cuts of 1.2 million barrels/day by OPEC in the Gulf. However, due to the increase in domestic demand and the increased compliance rate of production cuts in other countries, the overall export growth of OPEC was weaker than 1.2 million barrels per day, and the supply in July was still relatively tight. Looking forward to August, according to the production-restricted alliance’s production increase plan, production in August will increase by 2 million barrels per day from the previous month. However, due to the strengthening of compliance rates in Iraq and others, we expect exports to increase roughly between 1 and 1.5 million barrels per day. According to the July China crude oil import data released by the General Administration of Customs last week, it fell from 13 million barrels/day in June to 12.08 million barrels/day, which is more consistent with previous market expectations, but there are still a large number of ships. Cargo clearance is centralized, so imports remain high compared to the same period in history. August may still be in the stage of digesting cargo and bonded stocks. The staged slowdown of China's procurement may not be reflected in the data until September to October. However, there is a marginal surplus in the spot market. There is still a large amount of West African crude oil for sale in August, with a quantity exceeding 10 million barrels. Unless Chinese demand quickly resumes, the Atlantic light oil market may face a dark moment again. All in all, although the oil market has entered a tight supply-demand balance and destocking stage from the balance sheet in the third quarter, what really affects the market is the market rhythm. In August, OPEC increased production and superimposed China's demand vacuum. Whether the market can continue to sell inventory smoothly is still in doubt, and the current crude oil fundamentals are still not optimistic.

From the perspective of exogenous factors, the recent depreciation of the U.S. dollar may be one of the few factors that can support oil prices. Due to the failure of the United States to fight the epidemic, the slow economic restart, and the superimposed Fed’s unlimited loose monetary policy, the current market is relatively pessimistic about the U.S. dollar. The index has fallen sharply since July. Therefore, if it is priced in euros or yuan, crude oil is equivalent to a round of decline. This is one of the important reasons why the recent internal market trend is significantly weaker than the external market. We believe that the game of weak fundamentals VS weak US dollar will continue in the short term. However, it is difficult for oil prices to break through the rise from a fundamental point of view. We can only hope that the dollar will continue to depreciate or sudden geopolitical events.

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

Risk: Supply disruption caused by sudden geopolitical events (The first line is the first contract to expire, the other five lines and so on). USD has depreciated sharply.

Iron Ore

The position on I2009 contract decreased by 19,272 lots and closed at ¥888 per ton, the position on I2101 contract increased by 19,207 lots and closed at ¥815.5 per ton.

【Important Information】

1. Metinvest BV released its operation report for the second quarter of 2020. The report shows that in the second quarter of 2020, Metinvest's iron concentrate production was 7.567 million tons, a month-on-month decrease of 390,000 tons (1%), and the first half of the year was 15.174 million tons. A year-on-year increase of 720,000 tons (5%). In the second quarter of 2020, Metinvest produced 5.124 million tons of tradable iron ore, an increase of 419,000 tons (9%) from the previous quarter.

2. Since the beginning of this year, as an important starting point for the proactive fiscal policy, the issuance of local government bonds has continued to accelerate and expand. In the first seven months of this year, the cumulative issuance of special bonds exceeded 2.46 trillion yuan, a record high during the same period, of which over 22,600 new special bonds were issued 100 million yuan, exceeding the level of last year and completing 60.4% of this year’s 3.75 trillion yuan limit.

3. In terms of spot, the PB powder in Rizhao Port is ¥895 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥945 per ton.

【Trading Strategy】

1. Arbitrage: Recently, the overall increase in the port inventory has not changed much. The dredging port and pig iron production are at a high level, and the demand continues to remain high. Under the high pig iron output, it is expected that the overall inventory will hardly be under cumulative pressure, and the coarse powder is still falling. The PB jinbuba spread is still at a high level, and the structural problem has not been alleviated. The 09 contract still has a certain margin and it is expected that the market will remain strong. It is recommended to cash and carry arbitrage iron ore.

2. Option strategy: The quotation object 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

Prospects of balance sheet: Weekly TA overhaul concentration has rebounded; however, the monthly frequency is still weak. If Yisheng overhaul is not fulfilled, it will continue to accumulate in August; Yisheng overhaul will be flat in August, 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 contract of RU01 fell by 80 or 0.64% and closed at 12,455. The main force contract of JRU10 rose by 5.0 or 2.98% and closed at 177.7. Yunnan WF closed at 11,050 to 11,200 yuan/ton, Hainan SCRWF closed at 11,100 yuan/ton, the second standard rubber closed at 10,700 yuan/ton, and Thailand’s RSS3 closed at 13,550 to 13,600 yuan/ton.

NR: The main force contract of NR10 fell by 280 or 2.89% and closed at 9,400. The main force contract of TF10 rose by 1.5 or 1.22% and closed at 135.2. The quoted price for Qingdao rubber in USD rose by 20-40 dollar/ton with normal inquiries. The spot price or CIF of STR20 was $1,380 to $1,385 per ton. The CIF of SMR20 in December was $1,400 per ton. The CIF of mixed rubber from Thailand in December was $1,400 to $1,405 per ton.

Customs data: In July, China imported 677,000 tons of natural and synthetic rubber (including latex), an increase of 22% year-on-year. From January to July, China imported 3.809 million tons of natural and synthetic rubber (including latex), an increase of 5% from 3.628 million tons in the same period in 2019.

Recently, Singapore’s National Day and Japan’s Mountain Day have been closed. In early August, the average daily rainfall in Thailand was 6.51mm, which was equivalent to the normal value of 7.78mm. Due to the increase in rainfall in the near end of the domestic production areas due to typhoon weather, the supply has tightened, and the premium of glue in Hainan to Yunnan has returned to the level of +1000 yuan/ton. The latest RU inventory subtotal was reported to close at 236,000 tons, and the inventory futures was 11,000 tons less than that, and the difference decreased by 69.3% year-on-year; the NR inventory subtotal reported to close at 39,000 tons. Both RU and NR warehouse receipts are removed from the warehouse.

Futures Operation Advice: As for the main RU01 contract, it is advised to wait and see, and pay attention to the support at the recent high of 12,370 points. (For reference only).