Crude oil futures experienced a sharp sell-off on June 12, with Brent crude plunging 6% intraday to hit $88.12/barrel before closing down 3.37%. WTI crude simultaneously broke below the key psychological level of $85, settling at $84.88/barrel. This is not only the first time since April 17 that WTI has fallen below the $85 mark but also a concentrated risk release triggered by a sudden shift in geopolitical expectations.
The direct trigger for this oil price crash came from two news catalysts. First, Trump's remarks on Iran led market expectations for a potential easing of US-Iran relations. Second, Iranian media released new details of a US-Iran memorandum of understanding, hinting at a possible loosening of sanctions. These signals combined directly triggered panic selling in the crude oil market. The CME subsequently announced the extension of WTI crude trading to a 7x24 hour mode, further amplifying intraday volatility.
From the closing data, light crude oil for July delivery on the New York Mercantile Exchange fell $2.83 to settle at $84.88/barrel, a drop of 3.23%; London Brent crude for August delivery fell $3.05 to settle at $87.33/barrel, a drop of 3.37%. A single-day decline of over 3% is considered moderate to strong in recent oil price volatility, and its impact on downstream chemicals should not be underestimated.
For the textile industry, crude oil prices are the starting point for the cost transmission of the chemical fiber chain. The prices of polyester raw materials PTA and MEG are highly positively correlated with oil price trends, typically with a lag of 1-2 weeks. The sharp drop in oil on June 12 means that the ex-factory prices of polyester chips, polyester filament yarn, and polyester staple fiber are likely to follow suit in the next two weeks.
For polyester plants already facing high inventory pressure, this is undoubtedly adding insult to injury. Public industry data shows that as of the end of May, inventory days for polyester filament yarn in the Jiangsu-Zhejiang region had risen back above 20 days, with all three varieties—POY, FDY, and DTY—facing destocking pressure. A collapse on the cost side combined with high inventory levels will further compress profit margins in the refining-polyester segment.
However, for downstream weaving mills and fabric buyers, this could be a rare cost window. If the downward trend in oil prices continues, polyester filament yarn prices are expected to see a 3%-5% reduction in late June. For export-oriented textile enterprises, the dual changes in the RMB exchange rate and raw material costs will directly impact the competitiveness of order quotations.
Practical Recommendations
#### For Buyers
- Monitor the linkage between PTA futures and spot prices in the next two weeks. If the PTA main contract breaks below 5800 RMB/ton, consider building up polyester filament yarn inventory in batches.
- Sign short-term price lock agreements with polyester plants to secure current lower prices and avoid passive cost increases if oil prices rebound.
- For autumn/winter fabric orders (e.g., taffeta, pongee), consider early stockpiling to lock in profits by leveraging the downward raw material cost cycle.
#### For Foreign Trade Companies
- Include a “raw material price fluctuation clause” in quotation sheets, stipulating that if polyester raw material prices rise by more than 5%, the buyer will bear part of the increase, thereby reducing exchange rate and cost risks.
- Use forward exchange settlement tools to lock in the RMB conversion rate for export orders due in June-August, hedging against the erosion of profits by RMB exchange rate fluctuations.
- Monitor geopolitical dynamics in the Middle East. If US-Iran relations show substantial easing, oil prices may remain low and volatile, providing an opportunity to increase the intensity of accepting chemical fiber fabric export orders.