Crude oil

The inventory of U.S. distillate declined, but sustainability remains to be observed.

The weekly data released by EIA last night showed that the biggest bright spot was the sharp drop in distillate inventory, which improved the structural contradiction of global distillate surplus. However, the sustainability of inventory decline still needs to be observed. At present, the core contradiction in the oil market is still focus on the refined oil, especially the surplus of distillates (diesel oil and aviation kerosene), which is the critical factors to prevent the current start-up of refinery. As a global diesel consumption center, Europe imports diesel from the Middle East, Russia and the United States. However, at present, the consumption of diesel oil in Europe continues to be weak, the inventory in ARA area is high, and even there is an increase in the reverse export of diesel oil from Europe to the United States. Since the end of September, some diesel refineries in Europe began to reduce the production, during the national holiday, the cracking of European Diesel on Brent rebounded to $5 per barrel. However, the rebounded space of the gap in the future still depends on the progress of demand recovery. It is worth to pay attention on the heating consumption in Europe and the United States in this winter.

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 geopolitical events and sustained sharp depreciation of the US dollar.

Iron Ore

On October 15th, 2020, the position on I2101 contract increased by 1,760 and closed at ¥787.0 per ton, the position on I2105 contract decreased by 2043 and closed at ¥726.5 per ton.

【Important Information】

1. According to the media reports, South Africa's Transnet freight rail (TFR) will carry out the facility maintenance on the transportation of iron ore railway from October 16th, during this period, the transportation will be suspended for 10 days. This year's maintenance work will install a new permanent bridge to replace the temporary bridge that was previously installed after the accident in Vredendal in November. TFR carries out regular maintenance on iron ore railway facilities every year. The railway extends from Sishen area in Northern Cape Province of South Africa to Saldanha area in Western Cape Province, with a total length of 861 km.

2. This week (10.9-15), 23 of 126 blast furnaces in Tangshan area were overhauled (excluding long-term shutdown), with a total volume of 20220 m³; the weekly affected output was about 412800 tons, and the rate of capacity utilization was 85%, increased by 0.08% compared with last week, decreased by 0.32% compared with the same period of last month, and increased by 11.66% compared with the same period last year.

3. In terms of spot, the PB powder in Rizhao Port was ¥872 per ton, golden bubba powder price was equivalent to ¥958 per ton.

【Trading Strategy】

1. In terms of supply, the total freight volume of Australia and Brazil is still at a high level. The year-on-year reduction of foreign pig iron is relatively large, and the pressure on the subsequent supply side is still under pressure. In terms of demand, recently, Tangshan region successively issued production restriction documents in October to suppress the rising space of hot metal; meanwhile, with the advent of autumn and winter heating season, the blast furnace operating rate is expected to decline, and the iron ore demand is expected to be weak. In terms of inventory, the port inventory continued to accumulate this week with a total increase about 2 million tons. The port inventory has accumulated since July. Overall, the spot inventory of iron ore will face the situation of oversupply in the later stage. There will be a greater pressure on the reduction of spot price in the later stage. However, the range of discount is relatively large, expected to be volatility. It is suggested to long 01 coking coal and short on 01 iron ore.

2. Option strategy: It is advised to hold the short position on i2101-C-870. (For reference only)

PTA

PTA: The volume of texture continues to decrease, which boost the demand for TA.

In October, if all the overhauls are fulfilled, the inventory will continue to decrease, and it is advised to focus on the overhauls development. There is an expectation of rigid accumulation in November and December.

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 fulfilling 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: October 15th, 2020, the main force contract of RU01 down by 5 or 0.04% and closed at 13,315. The main force contract of JRU03 down by 4.8 or 2.38% and closed at 197.3. Yunnan WF closed at 12,700 to 12,750 yuan per ton, Hainan SCRWF closed at 12,800 to 12,850 per ton, the secondary standard rubber closed at 11,200 to 11,300 per ton, and Thailand’s RSS3 closed at 16,700 yuan per ton.

NR: The main force contract of NR12 up by 5 or 0.05% and closed at 10,120. The main force contract of TF12 down by 3.5 or 2.33% closed at 146.0. Qingdao rubber in USD down by $15 per ton. The spot or CIF of STR20 was $1,545 to $1,555 per ton. The CIF of SIR20 in October was $1,485 to $1,490 per ton. The CIF of mixed rubber from Thailand in January was $1,525 per ton to $1,525 to $1,530 per ton.

News from automobile expert: on October 13, CAAC released the operation index of China's automobile industry in September 2020. In the first nine months of 2020, the cumulative sales volume of domestic vehicles was 17.116 million, with a year-on-year decrease from 9.7% in August to 6.9%. The CAAC said that with the implementation of the task “six stabilities" and "six guarantees", the production and the operation of enterprises continued to improve, the supply and demand was gradually improved, the employment and the good price was generally stable, the momentum of the development was further enhanced, and with the implementation of relevant policies and the activities, the effects of promoting consumption and the recovery situation of the automobile market continued to improve the sales.

Futures Operation Advice:

Today is the festival of death in Cambodia, and the local market is closed. data released by CAAC, the sales volume of cars increased by 8% on year-on-year base, and the volume of commercial vehicles increased by 40.3%. The tire operation during the National Day was better than that in the same period of last year. According to ZhuoChuang statistics, the domestic steel operating rate was 74.7%, 7.1% increasing on week-on-week base, the year-on-year (relatively) increase was 3.8%; the steel operating rate was 70.2%, the weekly (relatively) increase was 3.9%, and the year-on-year (relatively) increase was 8.3%. For the main RU01 contract, it is suggested to long a slight position when it retreats and set a stop at the recent low level. (For reference only)