1. Oil Price Plunge: Geopolitical Premium Rapidly Unwinds
On May 27, WTI crude oil futures settled at $90.14/barrel, down 3.99% from the prior session, with monthly losses expanding to 9.79%; Brent fell in tandem to $95.79/barrel, a 3.81% decline. The core driver: major reversals in US-Iran talks — Washington and Tehran remain deadlocked on the two core issues of Hormuz Strait control and nuclear program preservation, with mutual military actions reported, slashing market expectations for a near-term deal and triggering rapid risk premium unwinding.
2. Fundamentals Still Supportive, But Outlook Divided
Despite the significant short-term drop, current prices remain 45%+ above (WTI) and 48%+ above (Brent) year-ago levels, indicating no fundamental deterioration. On supply: OPEC+ maintains production cuts, US shale growth constrained by weak capital expenditure; on demand: global refinery operating rates stay elevated, Asia-Pacific petrochemical demand steady. Analysts project WTI recovering to $98-100 by Q2-end, with 12-month targets of $114 (WTI) and $120 (Brent).
3. Supply Chain Transmission: Plastic Cost Support Loosens
As the source feedstock for ethylene, propylene, PVC and other commodity plastics, crude oil price swings transmit down the industrial chain. For ethylene: naphtha cracker margins improve as oil prices fall, CFR Northeast Asia ethylene offers already showing weakness. For PVC: carbide-based process has lower oil sensitivity, but ethylene-based PVC costs clearly benefit from ethylene price retreat. In summary, plastic feedstock cost support faces a phased weakening risk in June; monitor ethylene and propylene inventory changes closely.
