PTA Follows Crude Oil Surge, Whether This Wave Of Rise Will Continue

Overnight oil OPEC meeting, to stimulate the oil prices repeatedly record high. The output reduction agreement changed from an initial expected increase of 500,000 b/d to a constant production, and finally a large-scale production reduction, gradually amplifying the positive expectations on the supply side. What's more, Saudi Arabia's subsequent plan to cut oil production, combined with other countries' resource cuts and offset cuts, has resulted in a much larger total reduction than expected. The balance of supply and demand of crude oil rapidly closed, the first quarter from a small accumulation expected to accelerate the de-storage. Until the global outbreak worsens further in the coming quarter and demand suffers further shocks, the fundamentals of crude oil will be better than expected. So the apparent cost drivers of PTA remain.

From the point of view of other potential factors, the increased demand for winter naphtha heating has pushed up the price of LPG, reducing the use of LPG as a replacement for fuel oil, thus driving the demand growth of naphtha. Influenced by epidemic prevention and control restrictions on travel, Asia gasoline cracking price continued to fall. Therefore, naphtha cracking price spread in the first quarter or continue to maintain high.

The recent performance of PX processing is relatively weak, mainly because the improvement of PX's supply and demand balance is far less than expected. The main reason is that the performance of demand-side PTA is not as good as expected. There is a shutdown risk in a 2.2 million ton plant in East China, and there is also a delay in the landing of the PTA plant that is expected to be put into production at the demand-side in the first quarter. Therefore, we believe that the improvement of PX processing is difficult to be driven upward in the short term. Even if there is a slight increase, the space is still from the benefit of the upstream processing. This makes the PX processing difference and naphtha cracking price difference or tend to balance slightly stronger state, conducive to the stability of the cost end.

From the point of view of supply and demand, PTA supply and demand in the first quarter is still a heavy inventory. However, if the shutdown of a 2.2 million ton plant in eastern China and the production of a 2.5 million ton plant in southern China are less than expected, the pressure on the supply side may slow down; On the demand side, based on the expected recovery of market demand after the launch of the vaccine, the seasonal decline of polyester may not be as large as the previous market expectation, so the expected accumulation of PTA supply and demand in the first quarter is about 1.2 million tons. The improvement in supply and demand alleviates the pressure of pessimistic market expectations, and to some extent also helps to raise prices. However, the fact that supply and demand accumulation exists, although ignored in the short term, it is still the main negative factors in the market.

PTA processing fees may be gradually compressed due to supply and demand accumulation, which is not conducive to the upward trend of absolute prices, but the range is very limited.

Therefore, our near-term cost-driven logic is not over yet, and the upper space remains dependent on crude oil. From the perspective of the future market, if the cost end loses momentum, supply and demand or relay costs will become the main factors affecting the market around the Spring Festival. The downward space is also given by crude oil and PTA processing fees, which may be too small. Medium - and long-term market, supply and demand improvement and cost rise price center of gravity logic still exists.

source: Hua Xian Tou Tiao    long the petrochemical chemical fiber net