Brent crude has climbed back above $101 a barrel and NYMEX crude is quoted at $89.16, with both benchmarks gaining more than 1% in a single session. For MEG, this cost push arrives at an opportune moment: port inventories have fallen to 86,000 tonnes, down more than 90% from the 975,000-tonne peak seen in the first half of the year. Cost support and rock-bottom stocks are pulling in the same direction, yet the real gate on prices is not supply — it is the order book of polyester plants.
Cost Side: Crude's Rise Provides a Cushion
Higher crude directly lifts the marginal production cost of oil-based MEG, and sentiment across the chemicals complex has warmed accordingly. More critically, the Middle East is a core global production region, and the Strait of Hormuz carries a large share of chemical exports. Persistent regional tensions are amplifying concerns over shipping delays and disrupted loadings.
Those concerns are already visible in inventory data. Domestic port stocks have slid from 975,000 tonnes in the first half to 86,000 tonnes, a historically low range. Industry data and market expectations both point to imports staying subdued in the fourth quarter, keeping port inventories weak and providing solid support for spot prices. For traders, low stocks mean spot is more resistant to declines, and the risk-reward of shorting looks unfavourable in the near term.
But a floor is not a launchpad. The other side of supply — domestic incremental volume — is quietly building.
Supply Side: Imports Shrink, Domestic Output Fills the Gap
National plant utilisation currently sits at a relatively high 65.92%, with coal-based and oil-based units running smoothly. Coal-based routes, buoyed by healthy margins, have pushed utilisation to around 71%, making them a force that cannot be ignored.
More importantly, two large units — China Saudi Gulei and Huajin Aramco — are scheduled to start up in the fourth quarter. Once they ramp up, domestic supply will gain considerable elasticity, capping prices. The gap left by shrinking imports could therefore be filled quickly by domestic cargoes.
The supply narrative thus becomes nuanced: geopolitical risk is bullish, but new capacity is bearish, and the two offset each other in the fourth quarter. Supply alone is unlikely to drive a sustained one-way rally.
Demand Side: Polyester Is the Real Decider
The key variable determining MEG's upside is downstream polyester. The fourth quarter marks the seasonal transition window, with the traditional "Golden September, Silver October" peak winding down and terminal textile orders losing momentum. Weaving orders are weak and finished-goods inventory destocking is under pressure.
Facing relatively high MEG prices, polyester plants are feeling intensifying cost pressure. Resistance to expensive feedstock is strong, purchases are mostly just-in-time, and there is little appetite for large-scale restocking. Passing higher raw material costs up the chain is proving difficult.
Compounding the problem, tight PX supply in the fourth quarter is forcing many polyester producers to cut operating rates. Once polyester runs drop, MEG consumption falls directly. Even if MEG supply contracts temporarily, without a genuine recovery in terminal textile consumption, polyester makers cannot sustain high feedstock costs for long and may cut rates further, dragging on MEG demand.
Verdict: Range-Bound with an Upward Bias, but No Fuel for a One-Way Rally
In sum, higher crude, geopolitical disruption and low port stocks give MEG short-term support, and prices have a basis to trade range-bound with an upward bias. But supply-side positives alone are unlikely to drive a sustained one-way move.
The extent of any rally hinges on two variables: first, supply changes from Middle East shipping and the pace of new domestic plant start-ups; second, whether textile terminal orders improve and whether polyester can maintain stable utilisation. If downstream demand fails to materialise and negative feedback builds through the chain, MEG's upside will be clearly capped.