The price of WTI crude oil touched $75 per barrel on August 4, marking the lowest level since July 13, with a single-day plunge of 4.75%. Brent followed with a 4% drop, and both benchmarks fell nearly $5 from their intraday highs within hours. For the textile industry, this is not just an energy headline but a critical signal for raw material costs.
Background
The sharp decline was triggered by comments from U.S. Treasury Secretary Bessent, who suggested that an Iran deal could be reached as soon as tomorrow to reopen the Strait of Hormuz. This quickly deflated geopolitical risk premiums, prompting the market to reprice supply-side uncertainties. The strait handles about one-third of global seaborne oil trade, and its reopening would likely boost Iranian exports, easing the current tight supply picture.
Intraday movements showed WTI dropping over $1 around 19:45, then losing the $76 level, eventually hitting $75. Brent fell below $81, reaching a mid-July low. Such rapid declines often signal a shift in market sentiment from 'fear premium' to 'easing expectations.'
For the textile value chain, crude oil prices anchor petrochemical-based raw material costs. PTA, MEG, polyester filament, and nylon all derive from naphtha. Every $1 drop in oil prices reduces PX costs by about $3-4 per ton, which then transmits to PTA and polyester products. This nearly 5% decline could theoretically lower polyester filament costs by 150-200 yuan per ton.
Industry Impact
Weakening cost support is a double-edged sword for downstream weaving and fabric manufacturers. On one hand, lower procurement costs could ease previous margin compression. On the other, falling price expectations may trigger a 'wait-and-see' attitude, delaying orders and slowing inventory turnover. August is typically the peak season for autumn/winter fabric stocking; if raw material prices continue to weaken, greige and fabric prices may follow, squeezing traders' margins.
Regional industrial clusters such as Shengze, Changxing, and Xiaoshan have already seen loosening quotes in polyester products. Some polyester plants are offering discounts to move inventory, but downstream buying enthusiasm remains low. Industry data shows polyester filament inventories had risen to over 20 days by late July; if oil prices stay low, destocking pressure will intensify.
For exporters, lower oil prices also imply reduced shipping costs, which partially offsets the impact of RMB exchange rate fluctuations. However, geopolitical uncertainties remain; if Iran negotiations stall, oil prices could rebound sharply, leaving cost-side risks unresolved.