Crude oil surge lifts futures, but PET bottle chip spot struggles to follow

WTI crude oil futures surged above $95/bbl on June 8, hitting a recent high, driving futures prices of PTA, PX, MEG, and PET to rise by more than 3% on China's Commodity Exchanges.

The direct trigger for this round of oil price increases was the renewed escalation of tensions between Iran and Israel, particularly after the Israeli military confirmed it had struck Iranian petrochemical plants, such as Mahshahr Petrochemical Zone.

As a result, PET bottle chip plants' spot quotes mostly moved higher on June 8. In the afternoon, the negotiation range rose from the morning level of 8,150–8,300yuan/mt (ex-factory) to around 8,300–8,400yuan/mt (ex-factory), with some goods at as high as 8,500yuan/mt (ex-factory).

However, downstream restocking interest remained subdued, and overall market sentiment was still tepid, with only a few large PET bottle chip producers seeing modest increase in volumes transacted. And the actual transaction price did not follow the gains much, with weighted average transaction price rising only about 100yuan/mt from last Friday, unlike the sharp rebound in the futures market.

Theoretically, a rise in crude oil should drive the energy and petrochemical industry chain to follow suit, but actual feedback from the PET bottle chip spot market suggests that this round of price increases has not yet been smoothly transmitted.

Recently, major downstream end-users have generally resisted high-priced materials, while speculative hoarding by traders and small-to-medium end-users has mostly disappeared, leaving market transactions to rely on inelastic demand. It can be said that market expectations of supply and demand are having a far greater impact on price trends than cost support.

Overall, the brief rebound of crude oil to a stage-high level has indeed provided cost support for PET bottle chip, but the market's dominant drive remains on the supply-demand front. The dual pressure of anticipated supply increases and weak demand expectations far outweighs the upward push from rising costs. This has led to a wide-range, high-level consolidation for PET bottle chip prices in the near term, characterized by "capped upside and limited downside."

In the near future, the spread between futures and spot prices is also expected to exhibit wide fluctuations. Key variables to watch in the future include: firstly, the navigability of the Strait of Hormuz, and whether US-Iran can ultimately reach an agreement; and secondly, the pace of plant restarts and new capacity launches. If the restart expectations driven by high profits are fully realized, the supply-demand balance will further weaken. However, the latest information suggests that some plant restarts may be slower than the market expectation.

And lastly, the release of downstream restocking appetite should be watched closely. If prices retreat to a reasonable range, some restocking demand may be triggered.