Crude oil prices surged past $100 per barrel, and a broad rally in agricultural commodities is reshaping the cost structure of textile raw materials. On July 23, the ICE cotton futures front-month December contract settled at 81.21 cents per pound, up 0.12%, maintaining gains despite notably weak export sales data.
The impact of rising oil prices on the cotton-textile chain is not directly on cotton itself, but through the cost of its substitute—polyester fiber. As crude oil rises, the production costs of PTA and polyester staple fiber increase, making cotton relatively more attractive. On July 23, Brent crude hit a nearly two-month high, with an attack on an oil tanker in the Red Sea intensifying supply disruption fears, a shock that quickly transmitted to the textile chemical fiber segment.
Meanwhile, CBOT wheat futures hit a two-year high, with soybeans and corn also firming, providing additional sentiment support for cotton. This cross-commodity linkage has been particularly evident in recent sessions, suggesting that macro and geopolitical factors have temporarily overshadowed the weak demand fundamentals in cotton's pricing logic.
The latest USDA export sales report showed that for the week ending July 16, net U.S. upland cotton sales for the current marketing year were 51,287 running bales, up 49% from the previous week but 12% below the prior four-week average. Chinese purchases totaled 15,475 bales, with zero net sales for the next marketing year. This reflects Chinese buyers' cautious approach at current price levels, preferring hand-to-mouth procurement over building long-term inventories.
Shipment data was more optimistic, with exports reaching 276,313 bales, up 29% week-over-week and 15% above the four-week average. This indicates that previous orders are still being executed, but new demand momentum is lacking. For Chinese buyers, at the current ICE price of around 81 cents, and with a potentially weak renminbi, the actual landed cost will be higher, limiting the appetite for large-scale replenishment in the near term.
On the supply side, uncertainties are building. India's main cotton-growing regions are experiencing delayed monsoon rains, slowing planting progress and threatening final acreage, which could impact the 2025/26 crop. Consultancy Agroconsult forecasts Brazil's new-season cotton output at 4.2 million tons, down 1.5% year-on-year due to reduced planted area.
Pakistan's moves are noteworthy. The country has ordered about 206,000 bales from the U.S. and is stepping up purchases from Brazil, reflecting deepening import reliance after a domestic production shortfall. As a major South Asian textile exporter, Pakistan's growing raw material gap means a stronger buyer will enter the international market, providing medium- to long-term support for cotton prices.
ICE data showed that deliverable stocks of No. 2 cotton futures contracts stood at 94,235 bales as of July 22, unchanged. The lack of a surge in stocks suggests no significant selling pressure in the spot market. The U.S. dollar index strengthened on the day, typically a headwind for dollar-denominated commodities, yet cotton futures still closed higher, indicating that bullish forces driven by macro and geopolitical factors prevailed.
The core market conflict is between short-term weak export data and medium-term supply contraction expectations. For textile mills, higher crude oil prices raise chemical fiber costs, potentially shifting some orders toward pure cotton products, but this requires cotton prices to remain relatively stable. If cotton prices rise too quickly on supply speculation, end-user order affordability will be tested.