The energy and chemicals market is expected to see higher openings today, driven by strong support from oil prices and renewed supply-side concerns stemming from geopolitical tensions.
PX (Para-Xylene):
Supply and demand dynamics show stable supply with increasing demand. The operating rate in China's industry increased by 0.2 percentage points month-on-month to 60.0%, still at a five-year low. The operating rate in the Asian PX industry rose by 1.2 percentage points to 57.5%. Scheduled maintenance for PX in July is expected to reach a record high. Once this round of maintenance concludes, most planned overhauls for the year will be completed. On the demand side, high levels of PTA maintenance are temporarily suppressing PX demand. PX is expected to be in a destocking phase during July and August. The U.S. State Department issued a global security alert, advising citizens to be aware of overseas risks and warning that the situation could escalate further. Concurrently, Iranian sources reported that traffic through the Strait of Hormuz has dropped to zero. At Monday's open, Brent crude surged over 3%, approaching $91 per barrel, while precious metals weakened collectively. In the absence of expectations for peace, oil prices are likely to maintain a pattern of being "easier to rise than fall, with an upward bias." A significant price correction would require signals of de-escalation on the military front. Overall, the renewed halt in shipping through the Strait of Hormuz means the fundamentals for chemical products remain dominated by the supply side. With strong support from oil prices on the cost front, chemical products are expected to open higher today to catch up with gains. The PX September contract is projected to open higher within the 8300-8400 range, following oil's lead. The trading strategy is to focus on buying on dips for short-term trades, with the resistance zone seen at 8500-8600.
PTA (Purified Terephthalic Acid):
Supply and demand dynamics show both increasing. In the current period, Yizheng Chemical Fiber reduced its operating rate while Yisheng Dalian restarted, leading to the PTA industry operating rate increasing by 0.9 percentage points month-on-month to 59.2%. Future changes in operating rates will mainly come from equipment replacement operations at Yisheng Dalian, leaving limited room for further actual rate reductions. Nevertheless, maintenance volumes in July are still expected to set new historical highs. On the demand side, grey fabric orders are generally weak, with knitwear orders seeing a slight increase. The polyester industry operating rate increased by 1.4 percentage points to 82.3%, with the inflection point in polyester plant loads appearing before that of terminal demand. PTA is expected to be in an overall destocking state during July and August. Overall, the renewed halt in shipping through the Strait of Hormuz keeps the fundamentals for chemical products supply-driven. The TA basis has declined significantly, putting pressure on processing margins. With strong support from oil prices on the cost front, the PTA September futures price is expected to open higher today within the 5900-6000 range, following oil's lead, with increased intraday volatility. The trading strategy is to focus on short-term buying on dips, with the resistance zone at 6000-6100.
EG (Ethylene Glycol):
Supply and demand dynamics show stable supply with increasing demand. Domestically, the ethylene glycol industry operating rate increased by 0.3 percentage points month-on-month to 63.5%. Within this, the operating rate for syngas-based production decreased by 1.4 percentage points to 72.1%. Upcoming maintenance plans for plants such as Hengli, Xinjiang Tianye, and Zhengdakai mean domestic EG supply will remain low in July and August. The situation of受阻的中东 import transportation is unlikely to fundamentally improve in the short term. The destocking trend in social inventories is expected to continue into the third quarter. Overall, tight spot market sentiment is transmitting to the futures market. The EG 09 contract faces significant resistance above 4700, but support around 4500 remains strong. The overall outlook maintains a bullish bias.
PF (Polyester Staple Fiber):
Supply and demand dynamics show stable supply with decreasing demand. The operating rate for direct-spun polyester staple used in spinning remained flat month-on-month at 89.2%. Spot processing margins are expected to continue being compressed, and the industry's 20% coordinated production cut may be expanded. On the demand side, terminal demand is weak. Foreign trade orders show no significant signs of recovery, market sentiment is cautious, downstream transactions are weak, and stocking mentality is conservative. Short-term demand is unlikely to improve. The operating rate for yarn mills decreased by 0.8 percentage points to 52.9%, at a low for the same period in five years. Overall, the fundamentals for staple fiber itself are weak. The PF September contract price is expected to fluctuate in line with cost-side movements. The resistance zone to watch is 7500-7600.
PR (Polyester Resin / Bottle Chip):
Supply and demand dynamics show increasing supply with stable demand. On the supply side, the bottle chip industry operating rate increased by 3.2 percentage points month-on-month to 80.0%, having largely recovered to levels seen before the coordinated production cuts began in the second half of last year. New production from recently commissioned plants like Fuhai and Kesen, as well as the restart of the long-idled Anhua plant, will gradually come online, increasing supply pressure. On the demand side, the terminal market is in its peak consumption season, but trading activity in overseas markets is average. Spot processing margins are also under pressure and declining, with the overall bottle chip spot basis remaining weak. Overall, bottle chip fundamentals are marginally weakening. The main PR September contract is expected to fluctuate in line with cost-side movements. The resistance zone to watch is 7300-7400.
Soda Ash:
Soda ash futures edged lower on Wednesday, with spot prices also declining slightly. Shahe heavy soda ash was quoted at 1041 yuan/ton (-8).
The commodity market was mixed on Wednesday with general sentiment. Soda ash maintenance decreased last week, with output increasing by 14,000 tons week-on-week to 755,000 tons. Maintenance began last Wednesday at Hunan Lengshuijiang and last Sunday at Qinghai Fato. Downstream demand saw a slight decline, with midstream and downstream purchasing enthusiasm remaining weak. The latest plant inventory increased by 3,000 tons from last Thursday to 1.750 million tons. The latest delivery warehouse inventory increased by 1,000 tons from the previous week to 491,000 tons. Last week, three photovoltaic glass production lines underwent cold repairs (Jiangxi Rainbow, 1000T/D; Anhui Xinyi PV, 1000T/D; Flat Glass, 600T/D). There were no changes to float glass lines last week. This week, one float glass line began cold repair (Hunan Yanxiangxiang Industrial, 1000T/D). Recently, the combined daily melting capacity of float glass and photovoltaic glass has declined, leading to a slight drop in heavy soda ash demand. Light soda ash demand is weakly stable. Midstream and downstream purchasing enthusiasm remains weak. In May, soda ash imports rose to 16,700 tons, while exports slightly decreased to 263,000 tons. Macro-wise, recent domestic real estate sales data has declined month-on-month, approaching last year's levels. International macro influences are slightly positive (weakening US dollar index, reduced geopolitical concerns). Domestic macro factors are slightly negative (continued downturn in the real estate sector, weak consumption data). Overall, in the short term, soda ash supply is recovering while demand is weak, leading to bearish market sentiment. Weak demand and pessimistic expectations are weighing on prices. On the warehouse receipt front, soda ash warehouse receipts decreased by 18 lots to 3,297 lots on Wednesday.
Short-term soda ash futures are expected to consolidate weakly. The SA2609 contract's intraday reference range is 1040-1060.
Crude Oil:
According to the latest July balance sheet, the global oil market is projected to shift from a supply surplus of 1.89 million barrels per day in 2025 to a deficit of 910,000 barrels per day in 2026, before returning to a substantial surplus of 4.77 million barrels per day in 2027. The projected supply-demand gaps for the four quarters of this year are -220,000 bpd, 3.99 million bpd, 1.56 million bpd, and -1.77 million bpd, respectively. Since mid-June, global petroleum inventories have accumulated 1.9% more than expected, with crude oil inventories up 2.1% and refined product inventories up 1.4%. Influenced by the arrival of inventory in transit, onshore crude oil tank inventories have also rebounded from lows. Recently, US-Iran tensions have escalated again. Following eight consecutive days of US airstrikes on Iran, Iran formally announced its withdrawal from the memorandum of understanding on Saturday. Against the backdrop of essentially halted oil tanker traffic through the Strait of Hormuz, the risk of the Mandeb Strait in the Red Sea route being blocked is also rising. This would reverse the trend of increasing global crude oil inventories in transit since June and restrain the recovery of exports and production from Persian Gulf countries. Considering that the net long position percentage in overseas crude oil futures and options has only recovered to a low level of around 30%, crude oil is still viewed as oscillating with a bullish bias this week. Monitor changes in the US-Iran situation once Brent returns to the high range above $90 per barrel.
Trading Strategy: Buy on dips.
Fuel Oil & Low Sulphur Fuel Oil:
On Friday, the Singapore high sulphur fuel oil (HSFO) spot premium fell by $1.15 per barrel, while the low sulphur fuel oil (LSFO) spot premium rose by $1 per barrel. After Russia announced a ban on diesel exports until the end of July, overseas diesel crack spreads surged, also boosting LSFO, leading to a widening of the HSFO-LSFO spread. After Brent reached our previously estimated target of $85 per barrel last week, the oil market briefly turned to consolidation. However, since Friday, US-Iran tensions have escalated again, with mutual attacks continuing. The risk of the Mandeb Strait in the Red Sea being blocked is also rising. FU and LU are still viewed as having a bullish bias this week.
Trading Strategy: Buy on dips.
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