Crude oil plummets, can ethylene glycol take care of itself?

With the gradual weakening of global liquidity expectations and the weakening of crude oil futures prices, the domestic ethylene glycol futures 2101 contract has shown a rapid unilateral decline since the second half of September, and the center of gravity of futures prices has quickly fallen from 4000 CNY/ton. 3750 CNY/ton near the first line. As there is room for further increase in the load of domestic ethylene glycol installations, and the downstream demand is at risk of weakening after the National Day, the continued decline in the superimposed crude oil price will cause the cost of ethylene glycol to collapse. Possible.

The Fed's easing room is no longer large

In the September FOMC meeting, the Federal Reserve kept the federal funds target rate unchanged at 0-0.25% and maintained the scale of bond purchases unchanged, in line with market expectations. The content of this FOMC statement has been modified to adapt to the new monetary policy framework announced on August 27, which is mainly reflected in the fact that the Federal Reserve will allow inflation to be moderately higher than 2% for a period of time so that average inflation and long-term inflation expectations can reach 2%; Until full employment (unemployment rate drops to 4.0%) and average inflation reaches 2%, current interest rates will be maintained. The Fed said that the new crown epidemic will "continue" to have a serious impact on the economy, employment and inflation, reflecting the continued fear of the epidemic. In addition, the previous large-scale positive repurchase operation has dropped to zero in early July, and the Fed has decided not to continue.

On the whole, although the statement of this FOMC meeting is more dovish than that in July, it basically continues the contents of the new framework in August, the market has fully digested, and Powell's speech did not release more dovish signals. Judging from the September interest rate meeting, it is expected that the Fed’s most accommodative time has passed, and the United States will enter a new stage of delicate trade-off between recovery and policy. Under this shift, the overall direction of the policy is to gradually "withdraw the fire" as the economic recovery advances. This is not conducive to maintaining a firm posture for energy and chemical commodities such as crude oil and downstream ethylene glycol.

Expected weakening of crude oil supply and demand indirectly drags down ethylene glycol

As OPEC+ oil-producing countries entered the second stage of production cuts, the pressure on crude oil supply gradually picked up. According to OPEC's latest monthly report, crude oil supply increased in August, mainly from Saudi Arabia, the UAE and Kuwait. Among them, Saudi crude oil production increased by 475,000 barrels/day and recovered to 8.892 million barrels/day, which has exceeded the production reduction limit. The UAE and Kuwait also increased production by 180,000 barrels/day and 127,000 barrels/day. The overall production reduction of oil-producing countries was implemented. The rate fell sharply. At the same time, among those countries that intend to implement compensatory production cuts, Nigeria did not cut production. Only Iraq reduced production by 100,000 barrels per day, but it still fell short of its promised standard. In addition, OPEC+ failed to reach a consensus on further reductions in crude oil production at the September 17 meeting. It still maintained a reduction of 7.7 million barrels per day. It only adopted expected management, which obviously could not withstand the increase in supply from other oil-producing countries. The momentum of volume rebound.

Judging from the seasonality of crude oil consumption in previous years, as the US Labor Day passed on September 7, the North American summer oil peak period ended, oil demand turned into the seasonal off-season, and the operating rate of US refineries peaked and fell. Crude oil inventories of desalination have once again entered a state of accumulation. According to statistics, as of the week of September 11, the operating rate of US refineries remained at 75.80%, a sharp drop of 6.2% from the year's high of 82.00%, highlighting the past seasonal peak season. Although the US commercial crude oil inventory fell slightly to 496 million barrels on a week-on-week basis, it was still at the highest value over the same period in the past eight years. In addition to the off-season of seasonal demand in overseas countries such as the United States, Chinese demand will also decline. According to data released by the National Bureau of Statistics, in August, my country imported 47.48 million tons of crude oil, a year-on-year increase of 12.6%, and the growth rate dropped 12.4 percentage points from July. Although the growth rate of crude oil imports in August remained at a double-digit growth, they increased by 19%, 34%, and 25% year-on-year from May to July. The growth rate fell sharply. It is expected that my country’s crude oil imports in September will be affected by high inventories and low demand. Import growth will continue to fall. From a long-term perspective, OPEC stated in its monthly report that global oil demand will fall by 9.46 million barrels per day this year, exceeding the 9.06 million barrels per day expected a month ago. At the same time, the decline in global oil demand in 2020 will exceed the previous forecast, and the recovery next year will be slower than expected, which makes it difficult for oil prices to rely on the demand side to force their efforts to usher in the short to medium term rise.

On the whole, in the context of the weakening of the oil market's supply and demand prospects, future crude oil futures prices at home and abroad are expected to show a pattern of easy decline but difficult rise, which will also drag down the weak downward trend of ethylene glycol.

Glycol supply pressure rises after the holiday

Although from a short-term perspective, the current overseas supply of ethylene glycol is tight, and multiple sets of domestic devices are overhauled, in the medium and long term, after the National Day, the pressure on the ethylene glycol supply side will gradually be released from the fourth quarter. At present, the 400,000 tons/year ethylene glycol plant of Zhongke Refinery has been postponed to the end of September, and the commissioning time of the 500,000 tons/year ethylene glycol plant of Sinochem Quanzhou is expected to be after "November". In addition, the domestic Hubei Sanning Chemical Industry's 600,000-ton/year ethylene glycol plant will also be put into operation in the fourth quarter. In addition, after October, terminal demand is expected to weaken, so ethylene glycol will face the double shock of supply and demand, and then the price of ethylene glycol will continue to be under pressure.

Downstream demand is weakening, and the pressure on storage remains unabated

From the perspective of downstream demand, since September, the operating rate of terminal looms in Jiangsu and Zhejiang has continued to rise, but the upstream polyester yarn has a serious surplus and inventories continue to accumulate. It is currently the traditional peak season of "Golden Nine and Silver Ten". The rainy season and high temperature weather in the south have passed. Terminals rushed to orders, and the operating rate further rebounded. However, due to the relatively high level of overall stocking, the overall inventory level remains high despite recent promotional offers for polyester filaments. Inventories of polyester filament POY, DTY, and FDY continue to climb, and the polyester end operating rate slightly declines. In the short term, due to the acceptable terminal operating rate, polyester is still expected to maintain a high operating rate from September to October. After the National Day, terminal orders will gradually decline, and the pressure on polyester will increase rapidly. The ester end will drop down and stop, so the demand pressure for polyester raw material ethylene glycol will be greater in the latter part of the fourth quarter.

From an inventory point of view, due to the recent overhaul of overseas glycol plants, Dow in Canada and Nanya Chemical’s glycol plants in Taiwan are currently performing maintenance as planned. Shatra Big Refinery has unexpectedly shut down, and many units in the United States have been under Due to the impact of typhoon weather, the market has strong expectations for the decline in imports in the later period. However, after the National Day, the supply pressure will gradually rise as the maintenance of external devices is over. According to statistics, as of the end of mid-September, the stock of ethylene glycol in the main port of East China reached 1.487 million tons, an increase of 78,000 tons from last week.

to sum up

On the whole, as the global economy recovers steadily, the expectation of loose liquidity has weakened. At the same time, autumn and winter are the seasons for the high incidence of new crown epidemics, and the risk of recurrence of the epidemic increases. Go lower. Under the dual pressure of the recovery of ethylene glycol supply pressure after the holiday and the weakening of downstream demand, it is expected that the ethylene glycol 2101 contract will continue to fall in the market outlook. It is recommended that investors adopt the idea of selling short rallies or continuing to hold empty orders. , To build a warehouse in the range of 3900-4000 CNY/ton, and the target is 3200-3300 CNY/ton.