Oil prices continued their upward momentum on Tuesday, maintaining a strong performance. With the Strait of Hormuz once again subject to a two-way blockade by the US and Iran, shipping traffic through the critical waterway has plummeted once more, and the timing of its reopening remains uncertain. Overall, the resurgence of geopolitical tensions has led the market to continuously price in the evolving level of risk. A cautious approach or short-term bullish positions are currently advisable, with close attention to US-Iran developments.
Inflation in the United States for June fell more than anticipated. Data released by the US Bureau of Labor Statistics showed the US Consumer Price Index (CPI) rose 3.5% year-on-year in June, with the core CPI increasing by 2.6%. Both figures showed a clear decline from previous readings and came in below market expectations. The month-on-month CPI for June fell by 0.4%, marking the first monthly decline in six years and a drop significantly larger than the market's forecast of 0.1%.
The weaker-than-expected US inflation data has led the market to reduce bets on a July interest rate hike and pushed back expectations for the timing of US monetary tightening. Precious metals are likely to remain in a narrow range in the short term, awaiting further clarity on the Federal Reserve's monetary policy framework. The outlook for precious metals is slightly bullish but with limited upside potential.
Domestic methanol operating rates remain high, while downstream demand has declined. Methanol port inventories continue to draw down, with steady but tepid demand in the Jiangsu-Zhejiang region and a lower number of incoming vessels. The domestic methanol market is relatively strong, with decent auction results from producers. The basis in port methanol markets has weakened, and trading activity is average. With port inventories at low levels but expected to recover this week, ongoing US-Iran tensions, and a generally unremarkable spot market, methanol prices are anticipated to trade within a range in the near term.
From a long-term perspective, opportunities to establish long positions on dips are being awaited. In the medium to short term, prices are influenced by the progress of tapping and production increases. Major producing regions are currently ramping up output, although recent heavy rainfall has impacted tapping progress, keeping raw material prices firm. On the inventory front, social inventories of natural rubber in China are in a destocking phase, with divergences emerging between different rubber grades. On the demand side, tire manufacturers are facing increasing pressure on production and sales, compounded by high raw material costs, leading some firms to flexibly control output. The pressure is relatively greater for semi-steel radial tires. The medium to short-term outlook is for range-bound trading, making short-term transactions the preferred strategy.
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