On July 2, Brent crude oil broke below the $71 per barrel mark, with intraday losses widening to 1.00% and hitting a low of $70.54, the weakest since late February. This decline is not an isolated event—crude had been under pressure for several sessions prior, as demand concerns and weakening macro sentiment accelerated the selloff.
For the textile industry, crude oil price moves are never just numbers. As the upstream feedstock for the polyester chain, crude directly determines the pricing anchor for PX, PTA, MEG, and consequently polyester filament and staple fiber. When Brent slips from the $70 range, cost support for polyester raw materials begins to erode, and shifts in market expectations often outpace physical transmission.
Cost Transmission: From Crude to Polyester Fabric
Historically, every $1/barrel drop in Brent crude reduces PTA production costs by approximately 35-40 yuan per ton. Since PTA accounts for over 70% of polyester filament yarn costs, current oil prices could open up a 200-300 yuan per ton downside for polyester filament yarn.
Critically, the polyester chain is already in a fragile balance of high operating rates and high inventories. Industry data shows that polyester filament yarn inventories have been accumulating since May, with average days of inventory for POY, FDY, and DTY rising above 20 days. Catalyzed by falling oil prices, downstream weaving mills are likely to further curtail purchases, and the wait-and-see sentiment may force polyester plants to cut prices to destock.
For weaving clusters in Shengze, Changxing, and Xiaoshan, this cost loosening is a short-term positive—gray fabric costs may fall, and profit margins could recover. However, if oil prices continue to decline, the 'buy on rising, avoid on falling' psychology will quickly spread among mills, trapping them in a passive cycle of waiting and further declines.
Macro and Industrial Resonance
Notably, this oil price decline is not purely technical. On the macro front, repeated shifts in Fed rate expectations and global manufacturing PMIs remaining below the breakeven level point to insufficient recovery in industrial demand. As a typical export-oriented sector, textiles are highly sensitive to external demand.
- Weak oil often coincides with global economic slowdown expectations, meaning the recovery in textile end-use orders may be slower than anticipated.
- The recovery of textile capacity in Southeast Asia is also diverting export orders from China, further suppressing domestic polyester consumption.
- Increased volatility in the yuan exchange rate complicates pricing and hedging for foreign trade companies.
In other words, the impact of falling oil on polyester costs is the 'visible line,' while the underlying global demand weakness is the 'invisible line' that textile companies should truly guard against.