Market Profile
Opinion Strategy
The OPEC+ emergency video conference ended in the early morning of April 13, Beijing time. The participating countries finally reached an agreement to reduce production. The first phase will reduce crude oil production by 9.7 million barrels per day in May and June this year. It is also the largest production reduction agreement reached since the establishment of the OPEC+ mechanism. The agreement has boosted oil prices, but the 10 million barrels per day production reduction is not enough to make up for the sharp decline in global oil demand caused by the epidemic. In the short term, although the production reduction agreement cannot significantly push up the center of gravity of crude oil prices, However, it revealed that the positive attitude of various countries towards promoting production reduction will undoubtedly have a powerful force in bottoming out oil prices. The current basic judgment is that the momentum of crude oil prices further falling to US$10/barrel has stopped, but the impact of the sharp drop in demand is still there. Crude oil may hover at low levels in the short and medium term. Taking New York WTI as an example, it is clear that the overseas epidemic situation has emerged. It may not be able to break through 35 US dollars per barrel before the turning point.
Due to the bargain-hunting behavior of market participants last week, there was a strong destocking of polyester raw materials, prices rebounded, the cash flow of major polyester products was restored, and the load on the weaving and texturing links increased. rebound. However, the weakness in terminal demand has not changed significantly, and subsequent replenishment efforts will weaken.
In terms of PTA supply, the equipment that was shut down for inspection in the early stage has gradually resumed operation, and the operating rate has increased to a high level of about 90%. At present, PTA’s cash flow is good, and the processing fee once shot up to around 800 yuan/ton. PTA manufacturers have low willingness to reduce production. In the short term, PTA may continue to be in the accumulation channel. The MEG operating rate has further dropped to about 65%, and coal-based MEG has been significantly suspended for inspection. The current operating rate is around 43%. In terms of spread profit, under the low oil price environment, the cash flow of MEG oil production is significantly better than that of coal production. From a fundamental perspective, PTA and EG have reached a short-term balance, short-term accumulation expectations remain unchanged, crude oil prices are running at low levels, and downstream demand is insufficient. We need to be wary of the risk of overestimation of processing fees.
Strategic Suggestions
PTA and EG are short allocations on highs. (For reference only)
Main risk points
1. The progress of the epidemic has triggered a sharp decline in downstream demand, which will compress raw material profits upward.
2. OPEC+’s ineffective implementation of production cuts has triggered a further collapse of the center of gravity of crude oil prices.
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