Crude oil

The reports of the three major institutions were released in September, and the views of the institutions were the same. Both the upward revision supply growth, the downward revision demand growth, and the overall loosening of the balance sheet. Market expectations were significantly more pessimistic than last month.

Demand: EIA predicts that the demand contraction in 2020 is 8.33 million barrels/day, which is a decrease of 70,000 barrels/day from the previous month. Among them, the OECD revised down 120,000 barrels/day and the non-OECD revised up 50,000 barrels/day. The United States, Europe and Asia-Pacific countries all have minor revisions, and the former Soviet Union has minor revisions. OPEC expects that 2020 demand will fall at 9.46 million barrels per day year-on-year, down 400,000 barrels per day from the previous month, mainly due to a sharp drop in demand for India and other Southeast Asian countries. The IEA predicts that in 2020, global demand will drop by 8.43 million barrels/day year-on-year, which is a decrease of 250,000 barrels/day from the previous month, of which OECD will be revised down by 210,000 barrels/day and non-OECD will be revised down by 40,000 barrels/day.

Non-OPEC supply: EIA expects 2020 non-OPEC supply to fall by 2.2 million barrels per day year-on-year, which is an increase of 130,000 barrels per day from the previous month’s estimate, of which the U.S. supply has been revised up to 190,000 barrels per day. The forecast of production decline is much more conservative than other institutions. EIA expects US crude oil production to fall by 870,000 barrels per day this year. OPEC expects 2020 non-OPEC supply to fall by 2.68 million barrels/day, an increase of 360,000 barrels/day from last month, of which the U.S. supply was revised up by 370,000 barrels/day, mainly due to the larger increase in liquid production data in June. IEA's 2020 non-OPEC supply is expected to fall by 2.64 million barrels per day, an increase of 210,000 barrels per day from the previous month, and the U.S. supply has increased by 190,000 barrels per day.

OPEC production: According to the EIA standard, OPEC's production in August increased by 960,000 barrels/day to 23.98 million barrels/day, of which Saudi Arabia’s production increased by 500,000 barrels/day, and the UAE increased by 250,000 barrels/day. The compliance rate was 104%. OPEC's August OPEC output increased by 760,000 barrels/day to 24.65 million barrels/day, and Saudi Arabia increased its production by 480,000 barrels/day. OPEC's overall production reduction compliance rate was 103%, and the compliance rate of Iraq and Nigeria increased significantly. According to IEA, the output of OPEC in August increased by 830,000 barrels/day to 24.51 million barrels/day, and OPEC's overall compliance rate was 95%.

Call on OPEC: EIA estimates COO for 2020 at 24.25 million barrels/day, which is revised down by 420,000 barrels/day from the previous month. According to the EIA balance sheet, the difference between supply and demand in the first to fourth quarters is +5.9 million, +7.1 million, -4 million and –3.3 million barrels/day, and revised up the balance sheet for the next three quarters. OPEC's 2020 COO is estimated to be 22.61 million barrels per day, a decrease of 750,000 barrels per day from the previous month, and from the first to fourth quarters, COO is estimated to be 2.07, 1.58, 2.55, and 2.84 million barrels per day. IEA's 2020 COO is estimated to be 23.46 million barrels/day, which was revised down by 460,000 barrels/day from the previous month, and from the first to the fourth quarter, COO is estimated to be 2.18, 1.65, 2.67, and 2.88 million barrels/day.

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. The dollar continues to depreciate sharply.

Iron Ore

The position on I2101 contract decreased by 2,151 lots and closed at ¥806.5 per ton, the position on I2105 contract increased by 178 lots and closed at ¥740 per ton.

【Important Information】

1. 45 ports across the country this week: the stock of imported iron ore was 114,928,100 tons, an increase of 363,600 tons from last week; the average daily port volume of 3,176,600 tons increased by 37,000 tons.

2. This week, the operating rate of 247 steel mills blast furnaces was 90.63%, a month-on-month decrease of 0.26%, an increase of 2.99% year-on-year; blast furnace ironmaking capacity used rate was 94.25%, a month-on-month decrease of 0.06%, and a year-on-year increase of 5.28%; the profit rate of steel mills was 93.51%, a month-on-month decrease of 1.30%, and a year-on-year increase of 4.76%; the average daily molten iron output was 2.587 million tons, a month-on-month decrease of 1,700 tons, and an increase of 140,400 tons year-on-year

3. Japan Iron and Steel Federation: In July 2020, Japan's steel consumption was 3.48 million tons, an increase of 12.8% month-on-month and a year-on-year decrease of 20%. From January to July, Japan’s domestic steel consumption totaled 24.49 million tons, a year-on-year decrease of 22.1%.

4. In terms of spot, the PB powder in Rizhao Port was ¥915 per ton, golden bubba powder price was equivalent to ¥974 per ton.

【Trading Strategy】

1. Arbitrage: This week, port inventories have accumulated slightly, but the pressure on the port has fallen sharply. The total number of port inventory has decreased, the inventory of coarse powder has still accumulated slightly, and the pig iron has continued to drop slightly. The current contradiction in iron ore is not yet obvious. The time for the steel with a high inventory is tight. There is a reduction expectation of pig iron production in the off-season. The iron ore inventory is under accumulation pressure in the off-season, and the basis of the 01 contract is also relatively large. The 1-5 reverse cash and carry arbitrage strategy is recommended.

2. Option strategy: It is advised to hold the short position on i2101-C-870.

PTA

The polyester load peaked and fell, and there were still long-term shutdown devices to resume work in the context of PX losses

In September, it was the first time to realize destocking if all overhauls are fulfilled, but the absolute number of inventories will still be high after the destocking; in October, if the overhauls are slow, there will be an expectation of inventory accumulation, and if all the overhauls are fulfilled, the inventory will decrease in stage. In terms of the unilateral strategy, it is advised to be neutral; for the strategy across varieties, the high inventory problem has not been resolved yet, and it is not advised to maintain the strategy across varieties, 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, it is advised to focus on the reverse cash and carry strategy opportunity after the next round of TA overhauls fullfilling and rebound of 1-5 spread. It is advised to focus on PTA factory inspection and fulfillment wishes, and the downstream restocking space and improvement of demand.

Natural Rubber

RU: The main force contract of RU01 rose by 30 or 0.24% and closed at 12,580. The main force contract of JRU02 rose by 0.7 or 0.38% and closed at 186.0. Yunnan WF closed at 10,650 to 10,750 yuan per ton, Hainan SCRWF closed at 11,850 yuan per ton, the secondary standard rubber closed at 10,650 to 10,700 per ton, and Thailand’s RSS3 closed at 15,600 to 15,900 yuan per ton.

NR: The main force contract of NR11 rose by 165 or 1.78% and closed at 9,460. The main force contract of TF12 rose by 2.3 or 1.67% closed at 139.9. The quoted price for Qingdao rubber in USD fell by $5 to $10 per ton with normal inquiries. The CIF of STR20 in December was $1,440 to $1,450 per ton. The CIF of SMR20 was $1,410 to $1,420 per ton. The CIF of mixed rubber from Thailand in December was $1,415 to $1,420 per ton.

Economic Information News: China Association of Automobile Manufacturers released data on September 10, showing that in August this year, car sales increased by 3.5% month-on-month and 11.6% year-on-year. Sales in the first eight months fell by 9.7% year-on-year, and the decline was narrower than the previous seven months. Experts said that the promotion of consumer policies and the arrival of the traditional "golden September and silver October" consumption season will further promote the auto sales market, and it is expected that the auto market may usher in a sales boom.

Today Japan falls on Respect for the Aged Day, and the local market is closed. The main provinces of Thailand have average rainfall, with an average daily rainfall of 10.70mm, and the cumulative rainfall for three months is 55.8% higher than the same period last year. The domestic latex in Yunnan area is 900 yuan/ton, the price is relatively high, and it is equivalent to September 2017, May 2018, and December 2019. Domestic futures delivery inventories accelerated week-on-week, and the subtotal of RU futures inventories were 34,000 tons, which was higher than the previous week's 31,000 tons.

Futures Operation Advice: For the main RU01 contract, it is advised to wait and see and pay attention to the pressure at the recent high level. (For reference only).