CITIC Construction Investment Futures: Petrochemical Morning Report on April 7

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PX:

Supply and demand both decrease. Asian industry load decreases by 3.2% month-on-month to 69.5%, China PX industry load decreases by 3.0% month-on-month to 81.0%. The recent decline is mainly due to planned maintenance of facilities. Since domestic refineries still hold certain raw material inventories, proactive reduction in load has not yet become obvious. Currently, Shandong local refineries show signs of “oil preservation and chemical reduction.” On the demand side, unplanned PTA maintenance is expected to increase in April. PX fundamentals are relatively strong within the industry chain. OPEC+ decided to increase crude oil production by 206k barrels per day starting in May, but market focus remains on the US-Iran conflict. Although Iran has set up inspection stations in the Strait of Hormuz, with ship passage reaching a new high since the conflict began, the daily throughput of a dozen ships remains far below the over 100 ships before the conflict. US President Trump set 8:00 PM Eastern Time on April 7 as the deadline for response; Iran refused a temporary ceasefire and responded to the US ceasefire proposal with ten conditions. Meanwhile, considering that US stocks and crude oil prices have already decoupled, oil prices still have support. Given that the transportation blockade in the Strait of Hormuz has not been fully resolved, PX prices for May are expected to fluctuate with a slight upward bias driven by rising costs and supply contraction. Consider rolling long positions on PX May contracts during pullbacks, with support zones at 9,000-9,200, and watch for arbitrage opportunities on PX5-9, 7-9 during dips.

(Li Sijin, Futures Trading Consulting Professional Information: Z0021407, for reference only)

PTA:

Supply and demand both decrease steadily. In this period, Yisheng New Materials, Baihong, and Sanfangxiang reduced load, with industry load decreasing by 2.8% month-on-month to 79.0%, still relatively high for the same period in previous years. On the demand side, small orders are being issued one after another, while large batch orders remain cautious. Low inventory levels of gray fabric continue to be destocked, and some terminal factories have lowered operating rates. Some factories that have exhausted raw materials have started to reduce load or shut down. Polyester industry load decreases by 0.3% month-on-month to 86.5%. Short-term polyester feedback is unlikely to be significant, with limited capacity reduction. PTA spot basis has rapidly strengthened, with liquidity tightening in April, increasing the likelihood of fundamental and cost resonance. The PTA supply-demand outlook for April is improving. Overall, actual domestic supply reductions are beginning to appear, but short-term reductions are expected to be limited. As long as the Strait of Hormuz transportation remains blocked, news of upstream refinery shutdowns and load reductions will increase, and more countries are banning oil product exports. Considering the higher probability of further escalation of the conflict, PTA costs are strongly supported. TA May contracts can be considered for rolling long positions on dips, with support zones at 6,200-6,400, and watch for arbitrage opportunities on TA 5-9, 7-9.

(Li Sijin, Futures Trading Consulting Professional Information: Z0021407, for reference only)

EG:

Supply and demand are both stable. Domestically, ethylene glycol (EG) industry load decreases by 0.1% month-on-month to 65.7%. Synthetic gas-based EG load increases by 2.0% to 75.2%, reaching a high for the same period in previous years. Profits from synthetic gas-based EG have significantly recovered as prices rise. After maintenance ends, the probability of increased production is high. Saudi EG plant operating rate is 48%, while the Middle East (including Saudi Arabia) overall is 37%. Since late March, inquiries for EG exports have increased significantly, and news that India exempts EG import tariffs has further boosted export expectations. Spot basis and monthly spreads for EG have strengthened. The destocking in April is expected to accelerate. Overall, before mid-April, since actual shortages have not yet appeared, supply and demand are not the core variables; the focus is on sentiment and geopolitical news. From mid to late April, the impact will truly transmit to regions highly dependent on the Strait of Hormuz. EG prices are expected to rise under cost pressure and significant supply reduction, mainly buying on dips. Support zones are 4,800-4,900. Watch for rollover effects. EG 5-9 and 7-9 month spreads around 100 can be considered for rolling long positions on dips.

(Li Sijin, Futures Trading Consulting Professional Information: Z0021407, for reference only)

PF:

Supply and demand both decrease. Spinning direct-dyed polyester short fiber load decreases by 0.7% month-on-month to 91.8%, with some factories reducing production. However, the short fiber industry’s operating rate remains relatively high for the same period in previous years. Downstream demand is limited, unable to absorb rising costs, and processing margins remain under pressure, possibly leading to more shutdowns. On the demand side, terminal orders are insufficient, mainly destocking downstream. Due to high raw material prices, some downstream companies are increasing recycled short fiber usage, and spinning mills’ load recovery is slow, with polyester yarn load decreasing by 1.0% to 60.0%, at a five-year low. Overall, cost support is strong, and PF June prices are expected to follow raw material prices with oscillation and a slight upward bias, supported at 7,800-8,000.

(Li Sijin, Futures Trading Consulting Professional Information: Z0021407, for reference only)

PR:

Supply side remains strong. Estimated load in bottle chip industry is steady at 72.9%. Some major producers, under prior overselling pressure, have issued delay performance notices to reduce contract volume, combined with export orders rising to replenish stocks, leading to continued tight circulation sources. Spot basis remains strong, and processing margins are at a five-year high. On the demand side, terminal markets are in peak procurement season, with overseas demand also good, and exports are following up, expected to further boost demand. Overall, cost support persists, and delivery pressure in the futures market is rising. PR May prices are expected to outperform other polyester varieties, mainly with dips for long positions, supported at 7,800-8,000. Watch for opportunities to go long PR and short PF.

(Li Sijin, Futures Trading Consulting Professional Information: Z0021407, for reference only)

Crude Oil:

In Q1, global oil inventories decreased by 0.9%, with latest data showing crude oil draws of 1.4% and refined products draws of 2.9%. Rapid production cuts in Persian Gulf countries have shifted the immediate balance sheet from a surplus of 3-4 million barrels per day to a deficit of around 9 million barrels per day. As the last batch of ships leaving the Persian Gulf before the conflict completes, the decline in floating storage begins to accelerate at onshore tanks, directly supporting the spot market. The oil shortage situation in Middle East and Asia-Pacific regions is spreading westward. Focus on whether the US and Iran can reach an agreement before 8:00 AM Beijing time on April 8. Under the “big showdown” scenario, short-term risks of escalation in the Middle East remain. Near-month contracts target Brent at $120-130/barrel and WTI at $110-120/barrel. Strategies include calendar spreads and buying out-of-the-money call options on crude oil dips.

Trading strategy: Focus on calendar spreads and buy out-of-the-money call options on dips.

(Gao Mingyu, Futures Trading Consulting Professional Information: Z0023613)

Fuel Oil & Low-Sulfur Fuel Oil:

Last week, Singapore high-sulfur fuel oil cracking was volatile, while low-sulfur fuel oil cracking, along with diesel cracking, declined. Domestic FU and LU cracking remain volatile overall. Focus on whether the US and Iran can reach an agreement before 8:00 AM Beijing time on April 8. Under the “big showdown” scenario, the risk of escalation in the Middle East remains. Buying opportunities for FU out-of-the-money call options can be considered on dips.

Trading strategy: Buy FU out-of-the-money call options on dips.

(Gao Mingyu, Futures Trading Consulting Professional Information: Z0023613)