Energy and Chemicals Morning Commentary | May 19, 2026 Products: Crude Oil, PTA/MEG, Methanol, Silicon Chain
**Crude Oil** Supply Side: The primary factor remains the pace of the U.S.-Iran "fight and talk" dynamic and the process of reopening the Strait of Hormuz. Significant differences persist on core issues like uranium enrichment. Yesterday, Iran submitted a new proposal via Pakistan, which the U.S. rejected. Subsequently, former President Trump announced the cancellation of military operations originally scheduled to begin last night, granting Iran a few more days at the request of allies like Saudi Arabia to submit a new agreement, with the threat of immediate military action if unsatisfied. Therefore, geopolitical risks remain highly volatile. Demand: U.S. employment shows resilience. EIA data indicates strong apparent demand for U.S. refined products, but signs of demand destruction are becoming evident in Asian economies. Inventory & Spreads: As of May 1, EIA crude oil inventories fell by 4.31 million barrels, gasoline inventories dropped by 4.08 million barrels, while distillate inventories rose by 190,000 barrels. Refined product crack spreads remain elevated. View: The main contradiction lies in the progress of the U.S.-Iran negotiations. On one hand, refined product buffer inventories are depleting rapidly, and crack spreads are widening sharply. On the other, geopolitical volatility is immense due to news flow. If tensions escalate again, crude oil has the potential for another significant upward move.
**PTA/MEG** PX-PTA: Key Logic: 1. Fluctuating expectations around U.S.-Iran negotiations and potential conflict cause significant crude oil volatility. Actual traffic through the Strait of Hormuz remains low, but expectations for passage are rising (reports suggest "dark ships" are increasing). 2. Expectations for spring maintenance globally and load reductions in May persist. Due to the prolonged Strait closure, expectations for Asian refineries continuing to reduce runs in May remain. Domestic operating rates in China are also expected to decline in May-June. 3. Blending expectations are rising. U.S. gasoline crack spreads have reached historical highs, the U.S.-Asia price differential has opened, and there are initial reports of blending activities. 4. Negative demand feedback is emerging, but restocking potential exists. Downstream sectors are entering the off-season, with rigid demand falling, forcing further reductions in downstream operating rates. However, raw material and finished goods inventories at the terminal level are extremely low. If the situation clarifies and prices stabilize, an active restocking cycle could begin. Conclusion: Fluctuating U.S.-Iran negotiation/war expectations guide short-term sentiment. PX is expected to maintain a destocking trend due to high maintenance, and blending expectations are rising—strong current fundamentals but weaker expectations, with relative valuations against feedstocks declining again. The view remains for high-range volatility; consider buying near the lower range boundary. PTA logic follows PX. PET bottle chip fundamentals are relatively good due to sustained low operating rates but remain primarily cost-driven. Follow-up: Monitor U.S.-Iran conflict/negotiation progress, Strait traffic conditions; Asian plant operating rates; downstream price transmission and terminal negative feedback.
MEG: Supply Side: According to Longzhong data, as of May 15, the operating rate was 60% (+1.6 ppt). Middle East capacity accounts for 19%. Expectations for reduced ethylene cracking rates in Asia persist. However, domestic ethylene-based production remains stable, and coal-based operating rates have begun to recover recently. Demand Side: As of May 15, polyester operating rate was 81.1% (+0.2 ppt). Weekly textile terminal operating rate was 50.4% (+0.9 ppt). Downstream price transmission is smooth, but new orders are weak, leading to inventory buildup. Terminals remain cautious towards high prices, but raw material and finished goods inventories are already low. Rigid demand dominates until the situation clarifies, with restocking expectations remaining for later. Inventory Side: As of May 18, inventories at East China main ports decreased by 40,000 tons, with the destocking pace slowing slightly. View: MEG port destocking has accelerated, and destocking in May is relatively clear. However, expectations for coal-based capacity to increase again in June create a "strong reality, weak expectations" scenario. Only if operating rates do not increase and destocking continues would there be a driver for valuation recovery. Monitor cost support around 4600-4700.
**Methanol** Key Logic: 1. Fluctuating U.S.-Iran negotiation/war expectations drive significant volatility in energy and chemicals. Actual traffic through the Strait of Hormuz remains low, but passage expectations are rising (reports of increased "dark ships"). The Middle East accounts for 17% of global capacity. Following mutual refinery attacks between Iran and Saudi Arabia, some capacity is expected to be difficult to restore short-term. A few Iranian units have restarted, but imports are unlikely to recover by May, with June to be observed. 2. Negative demand feedback intensifies. MTO margins are acceptable, but load reductions are limited as low-cost feedstock inventories deplete. Monitor whether purchases of domestic methanol will continue. Shenghong has planned maintenance; monitor the status of Fude and Chengzhi. Traditional demand is entering the off-season, with operating rates declining. 3. The price ratio of methanol for chemical use versus fuel use is turning downward. Chemical use still offers value, but the fuel use price ratio has fallen significantly. Conclusion: Negative feedback from U.S.-Iran negotiation/war expectations drives price action. Fundamentally, the destocking pattern in May is expected to persist (one MTO unit shutdown temporarily doesn't alter the pattern), maintaining a "strong reality, weak expectations" structure. The view remains for high-range volatility. Consider long positions near the lower range boundary on pullbacks. Follow-up: Monitor U.S.-Iran conflict developments, Strait traffic; Middle East plant status; MTO unit operations.
**Silicon Chain** Industrial Silicon Daily: Reports on Monday indicated that 13 furnaces at an industrial silicon plant have been powered, with products expected tomorrow. Key Logic 1. Cost-driven. Following coking coal trends, reports of price guidance and a significant increase in Mongolian coal imports led to short-term weakness. Thermal coal is in a restocking period, providing overall support. Estimated cost based on the lowest silicon coal is around 8500-9100. 2. Supply is low, but restart expectations are high. Hoshine is gradually restarting production; monitor the progress. The Southwest wet season is approaching, increasing the probability of supply recovery, with restarts expected to accelerate from late May. 3. Warehouse receipt recovery after concentrated deregistration is below expectations, but there's no immediate squeeze risk. Conclusion: Recent futures prices mainly follow coking coal. The market speculated on the cancellation of Inner Mongolia's preferential electricity policy raising costs, but the actual impact is limited. Moreover, Southwest production recovery during the wet season is expected earlier, strengthening the overall pattern of increasing supply and weakening demand. Consider trading near boundaries or using options.
Polysilicon Daily: Key Logic: 1. Anti-internal competition efforts fall short of expectations. Another polysilicon industry meeting was reported last week, but no new progress was made. Reversing the current competitive landscape is more difficult this time, making substantive anti-competition measures unlikely to materialize soon. Cost-based competition is expected to dominate. Mainstream industry cash cost is 35,000-38,000 RMB/ton, with full cost at 42,000-45,000 RMB/ton. 2. Supply-demand tension temporarily eases, making spot price increases difficult; expectations for supply recovery during the wet season are high. Downstream production schedules saw a significant drop in April, with a slight improvement expected in May. However, sustained destocking momentum is still hard to see. Destocking in the past two weeks was mainly inventory transfer, and the pace has slowed again recently. 3. Exchange position limits have relaxed slightly, but warehouse receipt and inventory levels remain high. Total warehouse receipts and inventories exceed six months of demand. Conclusion: The anti-internal competition push in photovoltaics is weaker than expected. The stance against internal competition is clear, but the competitive landscape is hard to change immediately. The current predicament lies not only on the supply side but also in weak demand. With the wet season approaching, there is still a driver to test cash costs further. However, excessive bearishness is not warranted. The view leans towards range-bound trading around cost levels; consider trading near boundaries or using options. Follow-up: Monitor anti-competition efforts, industry meetings; polysilicon operating rates, warehouse receipts, inventories; downstream production schedules, terminal installation volumes.
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