On July 27, international energy markets experienced significant volatility. As the United States and Iran signaled a softening of tensions, the geopolitical risk premium that had been priced into crude oil rapidly unwound, sending global oil prices to their largest single-day decline in nearly two months and dragging down energy and chemical assets worldwide.
On that day, the September WTI crude futures on the New York Mercantile Exchange settled at $82.61 per barrel, down 7.50%, while September Brent crude on the ICE Futures Exchange closed at $88.36 per barrel, a drop of 8.70% and its lowest settlement since July 17. During the session, WTI briefly touched $81.99 per barrel, falling more than 8% intraday.
On July 28, international oil prices continued to trade on a weaker note, though the decline moderated significantly from the previous session. As of midday, WTI crude was down about 1.4%, hovering near $80 per barrel, while Brent crude fell more than 1% to around $84 per barrel.
The core driver behind this sharp sell-off was a temporary easing in Middle East tensions. Earlier, markets had been concerned about an escalation of the U.S.-Iran conflict potentially affecting the Strait of Hormuz, a critical global energy chokepoint, which had pushed prices higher. Recently, however, the United States signaled a pause in military action and a push for negotiations, while Iran also showed restraint through diplomatic channels. This eased market worries about supply disruptions, prompting capital to exit energy risk positions that had been built up.
That said, the market is currently pricing in an improvement in risk expectations rather than a complete elimination of supply risks. The transit situation through the Strait of Hormuz, regional developments, and the progress of follow-up negotiations remain key factors that will continue to influence oil prices.
The sharp drop in international crude quickly transmitted to China's domestic energy and chemical markets. On July 27, the domestic energy and chemical futures sector suffered broad-based heavy losses. The main SC crude futures contract closed down 8.55% at 542.1 yuan/barrel. Low-sulfur fuel oil fell more than 6%, while synthetic rubber, PX (para-xylene), and LPG all dropped around 6%. Methanol and PTA tumbled over 5%, and plastics fell more than 4%. On July 28, energy and chemical futures continued their downward trend, though the declines narrowed compared with the previous day.
Spot markets also weakened. On July 27, the average spot price of benzene in East China fell to 7,860 yuan/ton, down 480 yuan/ton from the previous trading day, with the Shandong market following suit to around 7,850 yuan/ton. The next day, benzene prices moved further lower, with East China spot dipping to about 7,700 yuan/ton, bringing the two-day cumulative drop to more than 600 yuan/ton.
Styrene, a major downstream product of benzene, averaged 8,660 yuan/ton in the Jiangsu market on July 27, widening the spread with benzene to about 770 yuan/ton, which eased cost pressures for styrene producers. PTA spot fell 315 yuan to 5,790 yuan/ton, while MEG dropped 107 yuan to 5,013 yuan/ton.
