SunSirs: Oil Prices Soften Temporarily; Chemical Product Prices Pull Back from Highs

After hitting a historic high on September 15, domestic crude oil futures prices have continued to pull back recently; the main contract (2611) has fallen below the 700 RMB/barrel mark.

During intraday trading on September 23, the main crude oil futures contract (2611) hit a low of 680 yuan/barrel, dropping more than 4% in a single day and falling over 20% from its previous high. In international markets, the price of WTI crude oil has dropped below $90 per barrel.

Geopolitical Tensions Persist

Regarding market news, Bank of America raised its price forecast for Brent crude oil for the second half of 2026, stating that the continuation of geopolitical tensions through the end of the year has become the bank’s baseline scenario. A recent research report from the bank shows that the Brent crude price forecast for the second half of this year was raised from $83 to $95 per barrel.

The market holds an optimistic view regarding Middle East oil supplies; the potential resumption of operations for Saudi Arabia’s damaged pipelines and continued shipping traffic through the Strait of Hormuz—alongside efforts to bring the US and Iran back to the negotiating table—have exerted downward pressure on oil prices, causing US and European crude futures to fall continuously. Market attention remains focused on potential declines resulting from US-Iran talks, and the overall sentiment leans toward optimism; the partial restoration of Saudi Arabia’s East-West Pipeline is also expected to weigh on prices, keeping the market trend predominantly bearish.

Baocheng Futures analyzes that while geopolitical instability in the Middle East persists—creating a supply risk premium—US crude oil production remains high and inventories have seen a slight build-up, partially offsetting supply-side bullish factors. Overseas consumption of refined oil products is entering a period of seasonal decline, while domestic refinery operating rates remain neutral; downstream purchasing is limited to immediate needs, resulting in a lack of strong demand-side momentum. Although expectations for a Federal Reserve rate hike in September have materialized, the US dollar remains strong, suppressing risk appetite for commodities and raising crude oil import costs, thereby capping oil prices. Against the backdrop of easing geopolitical risks, domestic crude oil futures are expected to maintain a volatile, slightly bearish trend in the short term. Chemical Prices See Broad Pullback

Amid weak oil prices, chemical products that had previously surged have recently experienced a broad pullback. On September 23, major futures contracts saw asphalt close down 4.61% and ethylene glycol (MEG) fall 3.82%, while short-staple fiber and methanol both dropped by more than 3%.

However, prices for certain upstream chemicals remain relatively high, exerting cost pressure on downstream finished products and leading to divergent profitability across the energy-chemical supply chain.

“Ethylene glycol prices rose continuously from July to September, peaking at over 7,400 yuan per tonne—a high not seen since October 2021.” Driven by this price surge, profit margins in the ethylene glycol industry improved significantly; domestic production facilities ramped up operating rates, and supply gradually recovered. Conversely, processing margins for downstream polyester products remained squeezed, dampening producer enthusiasm; multiple polyester plants opted to cut operating rates or shut down, keeping the overall polyester operating rate at a yearly low.

Against this backdrop, actual orders in the downstream weaving sector during the traditional “Golden September” peak season fell short of expectations. Loom operating rates remained low, and downstream purchasing was driven primarily by immediate needs rather than large-scale, proactive restocking. As of September 22, the polyester industry’s operating rate had dropped to 71.43%, down 19.74 percentage points year-on-year.

Zhang Guoliang believes that proactive production cuts in the polyester sector have directly suppressed near-term demand for ethylene glycol, causing a marked slowdown in the pace of inventory depletion. This implies limited room for further inventory reduction driven solely by demand; once increased domestic ethylene glycol supply hits the market—compounded by recovering import volumes—and exceeds current essential consumption levels, the market balance will shift from inventory depletion to accumulation.

Similarly benefiting from rising prices, domestic polyethylene (PE) production capacity utilization has recently edged up month-on-month… While the overall increase in supply remains manageable, demand recovery in the downstream sector is sluggish due to profit margin constraints.

Downstream Enterprises Face Profitability Pressures

High PE feedstock prices continue to squeeze processing margins, placing downstream enterprises under significant profit pressure and hindering the recovery of demand for end-use products such as agricultural films, packaging, and injection-molded goods. Currently, the overall operating rate for agricultural film production stands at only around 33%; while large-scale greenhouse film manufacturers maintain rates of 40%–50%, small and medium-sized processors operate at just 15%–20%, lacking the incentive to ramp up production. Despite the traditional “Golden September” peak season, downstream stocking activity has been weaker than in previous years, and the conversion of orders into actual sales has fallen short of expectations. Market activity is largely driven by immediate, essential needs, with little appetite for stockpiling; most processors are minimizing raw material inventories to avoid losses associated with high-priced feedstock. Consequently, weak demand has become the primary factor limiting any upward movement in PE prices.

If downstream profitability fails to improve, market purchasing sentiment will remain cautious, and PE prices are likely to continue fluctuating within a range. Moving forward, key factors to monitor include fluctuations in feedstock costs, domestic plant operating rates, and the actual volume of downstream orders during the “Golden September and Silver October” peak season. Should end-user demand remain weak and downstream operating rates fail to rise, the market faces a risk of further correction. (Source: Securities Times)

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