2019 has just ended, and at the beginning of the new year, the risk of geopolitical conflicts in the crude oil world has reached a climax. In the early morning of January 3, the U.S. military launched air strikes against two targets with ties to Iran.
Last Friday and even throughout the weekend, The United States and Iran are hot spots in the entire market. After the United States carried out the beheading operation against Iran on Friday, crude oil and gold rose sharply. Crude oil prices opened sharply in early trading, and the highest increase in oil prices in the three major regions of Brent, WTI, and SC reached more than 4%! Geographical conflict once again takes center stage!
As crude oil rises, commodities in the entire energy and chemical sector rise. For example, downstream products of crude oil such as PTA and ethylene glycol. Boosted by the surge in crude oil, PTA futures stopped falling and rebounded last Friday, and quickly rose after the opening on the 6th, reaching a high of 5,100 points. Also as a raw material for polyester, the market price of ethylene glycol has also risen due to the boost of crude oil. At the opening of trading on the 6th, the main contract of ethylene glycol futures on the Dalian Commodity Exchange directly rose by 100 points.
At the same time, stimulated by the rise in international oil prices and polyester raw materials, the production and sales of polyester filament also ushered in over 100 production and sales.
The new year has just begun. Taking advantage of the geopolitical crisis, polyester raw materials have experienced a rebound. So for PTA? In the pre-holiday stocking boom, how long can this rebound last?
1. After geopolitical events, oil prices are likely to rise in the short term, but the subsequent development remains to be seen
From the 2018 U.S. Since the unilateral tearing up of the Iran nuclear agreement, economic sanctions have been imposed on Iran many times and Iran’s crude oil exports have been blocked. This has led to a downward trend in Iran’s crude oil production and crude oil exports have almost dropped to near zero. According to Bloomberg data, Iran’s output fell to 2.08 million barrels per day in December.
Traditional major importers of Iranian crude oil, such as China and India, have also reduced their imports of Iranian crude oil to zero. In December, Iran’s crude oil exports were only 129,000 barrels per day. At present, Iran’s crude oil production mainly supplies domestic demand.
Overall, oil prices are likely to rise to varying degrees in the short term after geopolitical events. Judging from the impact of the incident, except for the attack on the Saudi oil field, other geopolitical events did not have a substantial impact on crude oil production, and there was no follow-up development. The impact of the incident was quickly forgotten and digested by the market. Judging from current news, this attack has not had an impact on Iran’s crude oil production.
Oil price trends before and after geopolitical events since 2019
This incident has caused tensions between the United States and Iran In a significant escalation, Iran vowed to retaliate against the United States. However, when announcing the increase in troops on the 3rd, US President Trump stated that the killing of Soleimani was not to provoke a conflict with Iran, but to prevent a war. It can be seen from US President Trump’s speech that the United States does not want to go to war with Iran.
Previously, Iran shot down a U.S. drone. President Trump had originally approved a military strike at dawn on the 21st local time in Iran in retaliation for Iran’s shooting down of a U.S. drone. behavior, but eventually withdrew the order. Recently, the U.S. Embassy in Baghdad was attacked. The United States believed that Iran was responsible and threatened to retaliate against Iran. The “targeted killing” of Soleimani was a retaliatory action by the United States. It was not the United States’ initiative to attack Iran. It can be seen that the United States does not want to have a comprehensive relationship with Iran. Start a war.
However, the development of the situation still depends on Iran’s attitude. Iran’s Supreme Leader Ayatollah Ali Khamenei vowed on the 3rd to carry out “severe retaliation” for the actions of the US military. The New York Times cited US cybersecurity Analyzes by senior officials and security experts say Iran’s “retaliatory measures” against the United States may include cyber attacks. Iranian hackers could use malware to cause significant disruption to the U.S. public and private sectors. Potential targets include manufacturing facilities, oil and gas plants, and transportation systems.
The United States is currently engaged in a trade war with the world, and the game between China and the United States is the most important part of it. Now the United States’ goals can be achieved by imposing economic sanctions and military containment on Iran. The use of all-out force against Iran is not imminent, and there is also this year’s U.S. presidential election, so more energy is needed to deal with it. To sum up, there is a high probability that a full-scale war between the United States and Iran will not break out in the short term, but minor frictions may be inevitable.
From the above analysis, three possibilities are extracted:
1. If there is no subsequent development of this incident, it will soon It will be forgotten and digested by the market, and some of the gains caused by the incident may be restored later, but judging from Iran’s attitude, it may not be that simple;
2. Iran fulfills its promise, The U.S. military took action in retaliation, but it was only a small-scale operation and there were some minor frictions. Oil prices will still see similar pulse-like prices in the near future.Judging from the frequent conflicts, the probability of such a situation is relatively high;
3. If a full-scale war breaks out between the United States and Iran, Iran’s crude oil production may be at a standstill, and oil prices may continue to decline. The market is rising, but countries such as Saudi Arabia and Russia are reducing production. Judging from the current production situation in Iran, major oil-producing countries have the ability to make up for the supply gap, so it is difficult to reproduce the past 100-yuan oil price.
The fourth phase of Hengli Petrochemical Project and the full-process integration of Zhejiang Petrochemical are negative pressure, and the foundation for PTA’s rise is not solid
Looking at the polyester industry chain, PTA construction has dropped sharply recently, and equipment maintenance has increased. However, as the polyester load continues to decline, PTA accumulation pressure still exists, and the price fluctuates and weakens. It was only driven by events on Friday that it rose a bit.
In addition, at the beginning of this week, due to the strong trend of raw materials, especially the warming atmosphere of PX window negotiations, raw materials rose sharply, further expanding PTA factory is under pressure to lose money. Driven by costs, the PTA period has fluctuated and risen.
However, as the Hengli Petrochemical Phase IV project has entered the testing stage, the planned launch of new production capacity will give certain negative pressure to the market; in addition, the opening up of the entire process of the Zhejiang Petrochemical project will also suppress the market from the cost side. PTA futures prices fell sharply under the influence of the weakening trend of PTA supply and demand and the weakening cost.
From the perspective of PX, with the PX-naphtha price difference repaired, PX operating rate rebounded, while Zhejiang Petrochemical 400 Among the 10,000-ton PX devices, the 2 million-ton PX device has completed the entire process in mid-December 2019 and is in normal production. The other 2 million-ton PX device is also scheduled to start operation in mid-to-late January. It is expected that PX will face certain suppression in the future. At the same time, the cost support for PTA will be reduced.
From the PTA’s own perspective, although equipment maintenance has increased in the short term and the operating rate has declined, as new equipment comes online, it is expected that The supply of PTA in January this year remained at a high level. On the demand side, as the Spring Festival approaches, polyester production cuts increase, and demand is expected to decrease. From the perspective of market transactions, except for urgent replenishment, the market transaction atmosphere is weak. Therefore. In the short term, if cost support weakens, PTA prices will fluctuate weakly.
Of course, the market also needs to pay attention to the following risk points. First, although the Spring Festival holiday is approaching, the current inventory in the polyester market is low. Whether companies will postpone production cuts and shutdowns in order to stock up requires close attention. Second, there are still two aspects of PTA’s new production capacity in the first quarter that require further observation, including whether the new device can be put into production as scheduled, and whether the device load can quickly reach a high level after being put into production. The third is whether OPEC will continue to deepen crude oil production cuts, and at the same time be alert to the impact of extreme events on the market. For example, in the current conflict between the United States and Iran, it is still unknown how the matter will develop in the future. We must be alert to the occurrence of such black swan events, which will lead to rising oil prices and affect the price of the chemical fiber industry chain.
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