August: Crude Oil Moves Amid Volatility; Polyester Filament Gears Up For Peak Season

Crude Oil Market: OPEC+ Production Increase Triggers Price Decline

Since the start of August, the international crude oil market has shown a volatile downward trend. Recent international oil prices have fluctuated significantly, dropping by over 5% in the past two trading days, a decline closely linked to OPEC+'s decision to increase production.

Over the weekend, the OPEC+ Ministerial Meeting decided to raise daily oil production by another 547,000 barrels in September. As a key organization supplying approximately 45% of the world's oil, OPEC+ had previously supported oil prices through production cuts after the pandemic, but shifted its strategy to increasing production this year to regain market share. Since April, eight countries including Russia and Saudi Arabia have gradually increased production, with a cumulative release of approximately 2.5 million barrels per day (accounting for 2.4% of global demand) by the end of this production recovery round in September. Market concerns over oversupply intensified, causing oil prices to continue sliding at the start of August. On July 31, the price of light crude oil futures for September delivery on the New York Mercantile Exchange fell by 74 cents to close at $69.26 per barrel, a decline of 1.06%; the price of Brent crude oil futures for September delivery in London fell by 71 cents to close at $72.53 per barrel, a decline of 0.97%. On August 1, the settlement price of the U.S. WTI crude oil futures September contract was $67.33 per barrel, a drop of $1.93 or 2.8%; the settlement price of the Brent crude oil futures October contract was $69.67 per barrel, a decline of $2.03 or 2.8%.

Polyester Filament: Market Stabilizes Amid Supply-Demand Game

In the just-concluded July, the polyester filament market first declined then rose, laying a certain foundation for the August market. In the first half of the month, production and sales remained at a low level of 30%-50%, with enterprises' profit concessions to promote shipments having little effect, inventories continuing to climb, and prices falling accordingly. In the middle and late July, downstream users replenished stocks in a concentrated manner, driving up market production and sales; enterprises successfully reduced inventories, and the transaction focus fluctuated upward.

Raw material prices had a significant impact on the polyester filament market. In July, crude oil fluctuated within a narrow range, providing limited support to polyester filament. As of July 30, the average price of PTA in East China was 4,889 yuan/ton, a 3.79% drop from the start of the month. On the supply side, leading polyester filament manufacturers implemented production reduction plans in July; considering the previous inventory pressure, enterprises' subsequent operating rates are expected to continue to decline, easing supply pressure to some extent.

Demand was weak at the beginning of the month, with enterprises' profit concessions failing to boost shipments, cash flow being squeezed, and manufacturers starting to be reluctant to sell at low prices, keeping quotations relatively firm. From the middle of the month onward, although July was generally in the off-season, concentrated restocking by downstream users drove up polyester filament production and sales, reduced inventories, and pushed up prices. Enterprises achieved good inventory destocking results and strengthened their willingness to support the market, further driving prices upward.

Entering August: Polyester Filament Prices Unaffected by Crude Oil Drop for Now

In August, the decline in crude oil prices has not yet had a significant impact on polyester filament prices. After the concentrated restocking in mid-July, downstream textile manufacturers have adopted a cautious attitude, with purchases only meeting rigid demand. According to Longzhong data, since the end of July, the production and sales rate of polyester filament has mostly been 30%-40%, and the overall supply of polyester filament has been relatively stable in recent days, leading to the gradual emergence of supply-demand contradictions and a subsequent increase in inventories. As of last Thursday, the average inventory of polyester filament reached 23.6 days, an increase of 2.3 days from the previous week, with FDY seeing a more obvious increase.

Since FDY is mostly used in spring and summer fabrics and has low usage in autumn and winter fabrics, coupled with an overall decline in consumption in terminal fields such as clothing and home textiles this year-especially a significant drop in the consumption of sports hoodies and sweatshirts-the FDY market has become highly competitive, with some manufacturers having reduced production loads to avoid risks. In terms of prices, downstream market sentiment has become increasingly cautious, and without support from upstream costs, the upward trend of polyester filament prices has gradually stalled. However, judging from the current profit situation of polyester filament, prices do not support further declines. At present, polyester factories face relatively low inventory pressure, and the polyester filament market has gradually entered a stable period. The start of a new round of market trends may have to wait until the arrival of the second-half peak season.

Outlook: Peak Season Stocking May Become a Turning Point

At this stage, upstream polyester enterprises are adopting production reduction measures for inventory management. Since the current inventory of polyester filament manufacturers remains relatively low, most manufacturers are adopting a wait-and-see attitude, shipping at market prices. For the upcoming "Golden September and Silver October" traditional peak season, most industry insiders still hold high expectations, hoping that market demand will pick up during the peak season to improve the current market pattern.

Downstream weaving enterprises are also adjusting through production reductions, with the current scale of production suspension unprecedented; operating rates have dropped to around 50%, significantly lower than the same period in previous years. This has led to a reduction in market stocking volume for conventional products in the second half of the year compared to the past two years. However, once downstream orders pick up, the current low inventory level will play a role in repairing the prices and profits of grey fabrics and fabrics.

According to industry practice, autumn and winter orders will gradually be placed after mid-August, and market demand is expected to rise, with expectations of a rebound in the polyester filament market. As upstream and downstream enterprises continue to adjust their strategies according to market changes, coupled with the influence of the traditional peak season, the crude oil and polyester filament markets are expected to see new changes.