Energy and Chemical Morning Review | May 20, 2026 Products: Crude Oil, PTA/MEG, Methanol, Silicon Chain
**Crude Oil** Supply Side: The primary driver for crude oil lies in the pace of the US-Iran "fight and talk" strategy and the development of actual tensions. Significant differences remain between the two sides on core issues such as uranium enrichment. The US has stated it will give mediators 2-3 days to secure Iranian compromise, after which military strikes will be initiated. Mediation efforts currently show little progress. Demand: US employment remains resilient. EIA data indicates US refined product apparent demand remains strong, but signs of significant demand destruction are already evident in Asian economies. Inventory & Spreads: As of May 15, API crude oil inventories fell by 9.11 million barrels, gasoline stocks dropped by 5.8 million barrels, and distillate stocks decreased by 1.05 million barrels. Crude oil time spreads have moved higher. View: The main contradiction currently lies in the progress of US-Iran negotiations amid conflict. On one hand, refined product buffer inventories are depleting rapidly, with crack spreads widening sharply. On the other hand, geopolitical volatility driven by news flow is immense. Should the situation escalate again, crude oil retains the potential for another significant upward move.
**PTA/MEG** PX-PTA: Key Logic: 1. US-Iran negotiation and war expectations are fluctuating, leading to volatile crude oil prices. Actual traffic through the Strait of Hormuz remains low, but passage expectations are rising (reports suggest an increase in "dark ships"). 2. Expectations for spring maintenance globally and in China, plus anticipated load reductions in May, persist. Due to the continued closure of the strait, expectations remain for Asian refineries to continue reducing runs in May. Domestic operating rates in China are also expected to decline in May-June, with focus on the materialization of maintenance at Shenghong and Fuhai units. 3. Blending expectations are rising. US gasoline crack spreads have entered historically high territory, the US-Asia price spread has opened, and there are also rumors of blending activities. 4. Negative demand feedback persists, but restocking potential exists. End-users maintain rigid demand with low inventories. Downstream sectors face high inventories, low profits, and weak orders, maintaining downward pressure. However, with terminal inventories extremely low, an active restocking cycle could begin once the situation clarifies. Conclusion: Fluctuating US-Iran negotiation and war expectations guide short-term sentiment. PX is expected to maintain a destocking pattern due to high maintenance, and blending expectations are also rising. This presents a strong spot, weak forward outlook, with valuations relative to feedstocks having declined again. The view remains for high-range volatility. Consider buying on dips near range boundaries. PTA logic follows PX. PET chip fundamentals remain relatively good due to sustained low operating rates but are primarily cost-driven. Monitor: US-Iran war/negotiation progress, Strait of Hormuz traffic; Asian plant operations; downstream price transmission and terminal negative feedback.
MEG: Supply Side: Longzhong data shows operating rates at 60% as of May 15 (+1.6 percentage points). Middle East capacity accounts for 19%. Expectations remain for ethylene cracker run cuts in Asia. However, domestic ethylene-based MEG operations are stable, and recent coal-based MEG operating rates have begun to recover. Demand Side: As of May 15, polyester operating rates were at 81.1% (+0.2 percentage points). Weekly textile operating rates were at 50.4% (+0.9 percentage points). Downstream price transmission is smooth, but new orders are weak and inventories are rising. Terminals remain cautious towards high prices, but raw material and finished product inventories are already low. Demand is primarily rigid before the situation clarifies, with restocking expectations remaining. Inventory Side: As of May 18, inventories at East China main ports decreased by 40,000 tons, with the destocking pace slightly slowing. View: MEG port destocking has accelerated, and May destocking is relatively clear. However, expectations are for coal-based capacity to recover again entering June, presenting a strong spot, weak forward dynamic. A revaluation drive would require sustained destocking without increased operations. Monitor cost support around 4600-4700.
**Methanol** Key Logic: 1. Fluctuating US-Iran negotiation and war expectations drive energy and chemical volatility. Actual traffic through the Strait of Hormuz remains low, but passage expectations are rising (reports suggest more "dark ships"). The Middle East accounts for 17% of global capacity. Following mutual refinery attacks by Iran and Saudi Arabia, some capacity is expected to be difficult to restore short-term. Some Iranian units have restarted in small amounts, but imports are not expected to recover until at least June. 2. Negative demand feedback intensifies. MTO profits are acceptable, but loads are declining as low-cost feedstocks are depleted. Monitor whether they will continue purchasing domestic methanol. Shenghong has planned maintenance; monitor the situations at Fude and Chengzhi. Traditional demand is entering the off-season, with operating rates continuing to fall. 3. Methanol's price ratio for chemical use versus fuel use is declining. It remains competitive for chemical use, but the fuel use ratio has dropped significantly. Conclusion: Negative feedback from US-Iran negotiation and war expectations influences the market. Fundamentally, the destocking pattern in May is expected to persist (one MTO shutdown temporarily does not alter the pattern), maintaining a strong spot, weak forward structure. The view remains for high-range volatility. Consider long positions on dips near range boundaries. Monitor: US-Iran war developments, Strait of Hormuz traffic; Middle East plant operations; MTO unit operations.
**Silicon Chain** Industrial Silicon Daily Review: Reports on Monday indicated a plant with 13 furnaces has been powered on, with product expected tomorrow. Key Logic 1. Cost-driven. Following coking coal trends, weakened short-term on reports of price guidance and surging Mongolian coal imports; thermal coal is in a restocking phase, providing overall support. Calculated cost based on the lowest silicon coal is around 8500-9100. 2. Supply is low, but restart expectations are high. Hoshine is resuming production gradually; monitor restart progress. The Southwest wet season is approaching, making supply recovery likely, with restarts expected to accelerate from late May. 3. Warehouse receipt recovery after concentrated deregistration is below expectations, but there is no immediate squeeze risk. Conclusion: Recent futures movement primarily follows coking coal. The market speculated on the cancellation of Inner Mongolia preferential electricity, raising costs, but the actual impact is limited. With the wet season approaching, Southwest output recovery is expected earlier, strengthening the overall pattern of increasing supply and weak demand. Trading near boundaries or using options is still suggested.
Polysilicon Daily Review: Reports indicate 200k tons in Inner Mongolia, 120k tons in Leshan, and 50k tons in Baoshan plan to start feeding materials in mid-June (restarting 13% of capacity, increasing monthly output by 33k tons). Key Logic: 1. Anti-internal competition efforts fall short of expectations. Reversing the current market structure is more difficult this time, with substantial anti-competition measures hard to implement. No progress is seen, with cost-based competition expected to dominate. Industry mainstream cash cost is 35,000-38,000 RMB/ton; mainstream full cost is 42,000-45,000 RMB/ton. 2. Demand may have bottomed, but wet season supply recovery expectations are also high. More centralized PV projects have started recently. Downstream improvement is expected in May, but sustained destocking momentum remains elusive. 3. Position limit regulations have relaxed slightly, but warehouse receipt and inventory levels remain high. Total warehouse receipts and inventories exceed half a year's demand. Conclusion: The anti-internal competition effort in PV falls short. The policy direction is clear, but the market structure is hard to change for now. The current predicament lies not only on the supply side but also in weak demand. With the wet season approaching, downward pressure towards cash costs persists. However, excessive bearishness is not warranted. The view leans towards range-bound trading around costs, suggesting operations near marginal levels or using options. Monitor: Anti-internal competition efforts, industry meetings; polysilicon operating rates, warehouse receipts, inventories; downstream production schedules, terminal installation progress.
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