When the market expects OPEC to extend production cuts again to push up oil prices, geopolitical risks in the Middle East have given crude oil bulls another assist. The crude oil market still received unexpected news in the early hours of Monday morning – after the Iraqi Kurds began their referendum, Erdogan warned that Turkey might cut off the Iraqi export pipeline. Since then, international oil prices have soared. Brent oil broke through the US$58 and US$59 mark in a row, hitting a new high in more than two years, rising by nearly 4%; U.S. oil broke through the US$51 and US$52 mark in a row, hitting a new high in more than five months, rising by more than 3%.
Affected by the surge in crude oil, the polyester market has not “moved”
Although oil prices surged yesterday, judging from the overnight situation of polyester raw materials, the response was mediocre. PTA’s main contract fell 053% overnight, while the overnight electronic trading of ethylene glycol was not ideal, with the price falling below 2%.
In early trading, although polyester raw materials have stopped falling, it is difficult to make a big breakthrough, and polyester filament does not seem to have taken any action. Judging from the current polyester market conditions, most manufacturers are still waiting to see shipments and partially canceling discounts to test downstream reactions.
Why did the surge in crude oil not lead to a rise in the polyester market? On the contrary, it did not even stir up a small wave?
Compared with the carnival in the crude oil market, the reminders of some industry insiders are still worthy of attention: it is not yet known how effective the geopolitical risks in the Middle East will be in alleviating oversupply in the oil market. Therefore, as the domestic market is about to usher in the National Day holiday, the market is more worried about these “depth bombs”:
1. The foundation for this round of rising oil prices is not solid
Although crude oil is gaining momentum, some people in the industry have warned that the foundation for this round of rising oil prices is not solid. Commodity Futures Trading Commission data from earlier this year showed that crude oil puts were outnumbered by more than 11 to 1 at the time, and now that number is down to less than 3 to 1.
OPEC’s agreement to continue production cuts has not yet been finalized, and there is no guarantee that it can continue to extend production cuts after March next year. Michael Tran, director of energy strategy at RBC Capital Markets Co., Ltd., said that it is undeniable that we have indeed seen the results of OPEC’s efforts and crude oil prices have improved. But the key now is how long this trend can last. The head of BP also said that although there are signs of rebalancing in the crude oil market, U.S. shale oil production may still cause oil prices to turn downward again.
2. The peripheral commodity market has weakened, and the prices of some products in the market have fallen sharply, which has had a negative impact on the market of polyester raw materials to a certain extent
The recent resolution announced by the Federal Reserve is hawkish, and it is expected to raise interest rates in December, which will put pressure on chemicals in the long run. The incident also directly led to the annihilation of all chemicals in the commodity futures on that day. Methanol fell by nearly 4%, and rubber and PVC fell by more than 3%. Although ethylene glycol had good support, it was also unable to support itself. As of the close, the decline reached 3.86%. . It is precisely because of the weakening of the external commodity market that the prices of some products in the market have fallen sharply over the past few days, which has had a negative impact on the market of polyester raw materials to a certain extent.
3. With the Double Festival approaching, the polyester market will pay more attention to the downstream response, and the short-term market will enter the accumulated inventory range
The National Day and Mid-Autumn Festival holiday is approaching. Although crude oil has risen, we still need to be alert to the market reversal during the long holiday and the downstream weaving market is closed. Judging from the stocking situation during this year’s Double Festival, the polyester market is not very optimistic. Weaving factories have sufficient stocks in the early stage, so they are cautious in continuing to stock up, resulting in the recent sluggish production and sales of the polyester filament market.
The current operating rate of polyester filament factories is relatively high, causing factory inventories to begin to increase. According to the inventory status of some polyester factories detected by China Silk City Network, the current overall inventory of the polyester market has slightly increased to around 6-16 days; among which, FDY inventory Around the 5-8 day level, POY inventory is around 4-7 days, while DTY inventory is concentrated around 16-24 days.
Although the current factory inventory is still within a reasonable range, we have to consider the factors of holidays during the Double Festival. In addition, downstream weaving has stocked up in the early stage. During the Double Festival, the market will enter the inventory accumulation stage. The flaw in the current sluggish market is demand. Downstream orders are limited, and the fabric market transaction volume has not changed much from the previous period. According to surveys, downstream demand for polyester filament is also viewed with caution, and weaving stockings will be limited in the short term.
Generally speaking, judging from the recent market situation, the current demand link is still suppressing the market. Recently, the polyester market has been light. The entire market is mainly maintained by rigid demand. The market is more optimistic about the weak sentiment before the holiday. In addition, the current demand for polyester in weaving is not high. If the later weaving companies can digest the early raw material inventory and replenish the inventory in time, then the polyester price will still have a strong rebound momentum. Otherwise, there will be no reason for the market to rise in the short term.
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