Two Oils Drop Back To Pre-War Levels! Plastic Futures Continue To Decline

1. Overnight Crude Oil Market Developments

6/24: Passage through the Strait of Hormuz continued to improve, and oil-producing countries such as Iraq plan to accelerate production increases, causing international oil prices to fall. NYMEX crude oil futures Aug contract settled at $70.34/barrel, down $2.87/barrel, or -3.92% month over month; ICE Brent crude futures Aug contract settled at $73.74/barrel, down $3.34/barrel, or -4.33%. China’s INE crude oil futures 2608 contract fell by 10.5 to 489.1 yuan/barrel, and in night trading fell by 18.5 to 470.6 yuan/barrel.

Market Outlook

On Wednesday, oil prices fell sharply again, with WTI crude oil dropping below $70, and all major crude oil futures returned to levels before the outbreak of the U.S.-Iran war.Brent crude has once again shifted into a near-term backwardation structure, while China’s SC crude has long been in near-term backwardation.This means that not only has the geopolitical premium unwound, but the market has even begun pricing in a future supply glut. Although crude oil inventories are still declining—especially in the United States, where stockpiles continue to fall rapidly—this has not been enough to halt the decline in oil prices.

According to data released by the EIA, commercial crude oil inventories fell by 6.088 million barrels, a decline that was significantly larger than previous API inventory reductions. Strategic reserves also saw a substantial decrease of 9 million barrels. Additionally, crude oil inventories at the WTI delivery point in Cushing, Oklahoma, continued to drop sharply by 1.077 million barrels, falling below the 20 million barrel threshold for the first time since 2015. However, much to the disappointment of bullish traders hoping for a rebound, this data did not lead to an increase in oil prices. Market attention remains focused on the notable progress in supply recovery. From the statements made by Gulf countries this week, it appears that the pace of crude oil production recovery is exceeding expectations. Kpler data indicates that oil flows through the Strait of Hormuz are recovering, and following the signing of a memorandum of understanding (MoU) between the U.S. and Iran, the transit volume in June has risen to approximately 4.8 million barrels per day, which is quite significant progress. The increase in supply has exerted downward pressure on oil prices, overshadowing the bullish effects of the inventory decline.

Market panic sentiment has driven crude oil sharply lower, and the intuitive judgment is that the selloff has gone too far. While a stronger-than-expected rebound in supply has triggered a plunge in oil prices, crude inventories are also falling rapidly, and global refined product crack spreads remain elevated, reflecting that the supply of petroleum products is still relatively tight at this stage. (In an effort to push oil prices lower and quickly win more support for his midterm elections, U.S. President Trump complained that gasoline prices were not falling fast enough, saying he had ordered the Justice Department to investigate major oil companies for not doing enough to bring gasoline prices down.) This rare divergence reflects the unusual nature of the current situation. In addition to the pressure from recovering supply, as expectations for Federal Reserve rate hikes intensify and continue to drive the U.S. dollar stronger, risk assets such as gold, silver, and copper have generally declined over this period. Against this pessimistic backdrop, the oil market appears excessively panicked, and market sentiment is in an unstable phase. Meanwhile, President Trump is still using his “art of the deal” to keep pressuring and manipulating the market, but this is creating enormous difficulties for the oil industry. Executives in the U.S. shale oil sector lament that “the market can price risk, but it cannot price a social media post.” The White House’s irregular external statements surrounding the Iran conflict are creating chaos in the energy market and making it almost impossible for companies to plan their operations for the coming months. Sharp swings in oil prices could occur at any time, so pay close attention to timing and participate cautiously.

2. Macroeconomic Market Dynamics

U.S. Treasury Secretary Bessent againEmphasize the dominance of the US dollar.Praise Waller for eliminating forward guidance.

2. The U.S. current account deficit widened in Q1, with the goods trade deficit narrowing but the primary income balance turning into a deficit.

Trump accused oil companies of “ripping off” consumers and ordered the Justice Department to intervene.

It is reported that Russia has turned to Kazakhstan for 50,000 tons of gasoline to alleviate domestic fuel shortages.

5. U.S. strategic petroleum reserve inventories fell to their lowest level since the week ending June 24, 1983, while crude oil inventories declined for the ninth consecutive week to their lowest level since October 1984.

All major U.S. banks passed the Federal Reserve’s annual stress tests, paving the way for tens of billions of dollars in share buybacks and dividends.

7. Situation in the Middle East — ①The United States and Iran will continue technical consultations later this month.。

② United States: Over the past 24 hours, approximately 72 vessels have departed the Strait of Hormuz, carrying a total of 20 million barrels of oil.

③Israeli Defense Minister and Prime Minister once again made a tough statement that they will not withdraw troops from Lebanon.。

Sources familiar with the matter said that Gulf countries will push for waiving transit fees for passage through the strait. However, Iran is expected to propose charging fees for environmental protection, navigation, and security services.

3. Plastic Market Dynamics

Crude oil plunges, and the main plastic futures contract extends its decline.

Plastics were quoted at 6,865 yuan/ton, down 2.26% from the previous trading day.

PP was quoted at 7,104 yuan/ton, down 3.43% from the previous trading day.

PVC is priced at 4,477 yuan/ton, a decrease of 0.22% compared to the previous trading day.

Styrene was quoted at 7,309 yuan/ton, down 2.36% from the previous trading day.

4. Today's Market Forecast

PP: Crude oil prices continue to fall sharply over a wide range, causing rapid erosion of cost-side support, and polypropylene prices are generally on a downward trend. Downstream industries are in the off-season, with a strong wait-and-see sentiment. Market trading is sluggish, and the downward shift in the price center is unlikely to change. The market is expected to remain weak and trend lower in the short term.

PE: Weakness in both costs and demand is exerting pressure, squeezing market premiums. Short positions are being released intensively, weighing on market sentiment, and low-price sell-offs by traders are frequent. Downstream demand remains sluggish, with most downstream orders insufficient and short-term willingness to restock raw materials weak. The polyethylene market is expected to continue its downward trend today.

PVC: PVC supply is expected to maintain a steady short-term increase, mainly due to limited changes in maintenance scale and the load increase at some ethylene-based producers, while both domestic and overseas markets are in the off-season for demand, and stocking demand remains weak. Industry costs are basically stable, providing solid support to the market floor. Under weak expectations from industry policies and downstream demand, the market is likely to continue fluctuating within a bottom-range pattern.