Entering winter, natural gas and coal prices have risen sharply. European and American countries have fallen into severe inflation due to soaring energy costs, which has hindered economic recovery to a certain extent. Faced with calls from oil consuming countries such as India and Japan to rapidly increase production and pressure from the United States to release production capacity, “OPEC+” still adheres to its own path of gradual production increase. On January 4, “OPEC+” held a monthly meeting on production reduction, and the oil-producing countries reached a consensus and agreed to maintain a monthly production increase of 400,000 barrels per day for the seventh consecutive month.
Affected by this news, crude oil futures closed sharply higher, with New York crude oil hitting its highest closing price in two months. As of the close on the 11th, West Texas Intermediate oil for February delivery on the New York Mercantile Exchange rose $2.99 to $81.22 a barrel, an increase of 3.8%. This is the highest front-month contract price since November 11, 2021, according to Dow Jones Market Data. On the ICE Futures Europe exchange, global benchmark Brent crude oil rose $2.85, or 3.5%, to $83.72 a barrel in March, its highest settlement price since November 9, 2021. West Texas Intermediate and Brent crude have gained nearly 8% so far in 2022.
Boosted by this, domestic SC crude oil and related polyester raw material varieties rose on the 12th. The main SC crude oil contract soared nearly 3%, leading the rise in the commodity market; the main contracts of PTA and ethylene glycol also stopped falling and rebounded.
On the other hand, supported by the cost side, the price of polyester yarn has started to rise by 50-100 yuan/ton since the day crude oil began to rise. After several price adjustments, it has increased by nearly 500 yuan/ton.
International oil prices are expected to have further room to rise
Oil prices may rise by double digits this year
The rebound in oil prices of the two major international benchmarks reflects a reality: Although the COVID-19 epidemic is still spreading around the world, energy consumption levels have not been greatly affected. Especially in European and American countries, oil and gas supply is still very tight. As inventory levels continue to decline, the market’s expectations for “OPEC+” to increase production have become increasingly high, and investment banks generally expect that oil prices will continue to rise during the year.
“The infection rate of COVID-19 in the United States, the United Kingdom and other countries is still rising, and restrictions continue to be implemented, but the optimism in the oil market is tangible.” Tamas Varga, senior analyst at PVM Oil Associates, a large crude oil broker, said, “The oil market trend in 2021 It proves that although the road to fighting the epidemic is full of challenges, we are capable of defeating this epidemic.”
Such sentiments have led to more bullish expectations for oil price trends. UBS pointed out that crude oil and petroleum product prices will benefit from oil demand rising above 2019 levels, and Brent crude oil prices are expected to rise to US$80-90/barrel in 2022.
Goldman Sachs believes that the impact of Omicron on the economy will be limited, and it is expected that the price of Brent crude oil will remain around US$85/barrel in 2022 and 2023, and may even exceed US$100/barrel. Blackstone also boldly predicted that international oil prices will rise to US$100 per barrel in 2022, on the grounds that “OPEC+” and US shale oil cannot meet this year’s demand growth.
JPMorgan Chase also holds a similar view, believing that factors such as global economic recovery, falling crude oil inventories and slow recovery of production capacity will push international oil prices to double-digit increases during the year.
However, some people believe that there are still many uncertainties in the future trend of the international oil market. The U.S. CNBC News Network stated that in 2022, the oil market will continue to be affected by geopolitics. Events such as the confrontation between Russia and Ukraine and the Iranian nuclear negotiations may make phased progress, which will affect the trend of international oil prices. JP Morgan predicts that if the United States finally lifts sanctions on Iran, the latter may add 1.4 million barrels per day of additional production capacity in 2022.
“In the past year, oil inventories have declined and supply has exceeded demand. This year the situation has begun to be different. It is expected that oil inventories will begin to increase globally no later than the second quarter of this year.” Ed Morse, Citigroup’s global head of commodity strategy, said, “Therefore, , we believe oil prices may remain under pressure during the year.”
Short term polyester product prices
It is expected to continue to enter the upward channel
Crude oil is the leading variety in the futures chemical sector. If crude oil rises sharply, the downstream generally is less bearish about the market outlook, and the willingness to buy will be greatly increased. Market supply will be increased, and the improvement in market conditions will also be significantly boosted. The rapid manifestation of all this transmission effect is that crude oil is still the main determinant of the polyester industry chain.
In recent days, polyester factories have not only solved the problem of declining profits by raising prices, but also boosted polyester production and sales, breaking the bleak market that has been sluggish. The mentality of buying up has once again dominated the purchasing behavior of downstream weaving companies. At the same time, although December 2021 will continue the off-season of November 2021, after Christmas, foreign trade orders were suddenly issued intensively, injecting vitality into the lukewarm market. With the placement of downstream orders, the demand for polyester yarn fell by just one month at the end of the year. There was an increase in the month, at which time the polyester yarnPrices began to rise and had been rising for more than ten consecutive days as of January 11.
The sharp rise in crude oil in recent days has given the market bulls who have been complaining a shot in the arm, and polyester product prices may once again enter an upward trend in the short term. In addition, taking into account the gradual acceptance of the downstream market, the recent continued moderate rise will promote the market outlook. At the same time, the Spring Festival holiday has arrived, the market’s domestic and foreign trade orders may be stagnant in the short term, and the terminal weaving market’s replenishment demand is relatively weak. Generally speaking, the recent ups and downs in the polyester market are due to the intertwining of long and short factors. The trend has shifted from raw material cost support to partial return to fundamental demand. The basic balance of supply and demand in the later period is still the trend.
Overall, the current deep-seated changes in the supply and demand pattern have established a strong pattern for crude oil, while the changing attitude of global economies towards the epidemic has further increased market optimism. But at the same time, industry insiders also said that the current crude oil prices continue to rise, and the mentality of both polyester supply and demand is still very cautious. However, for now, the sharp rise in crude oil again in recent days has given the market bulls who have been complaining a shot in the arm. The polyester market will improve, and this optimism will continue to spread in the short term. Polyester product prices may once again enter an upward trend in the short term.
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