Fed Year-End Rate Hike Odds Rise! Oil Price Volatility Drives Divergence in the Plastics Market, with PP Fluctuating and PVC Weakening

I. Overnight Crude Oil Market Dynamics

The U.S. has stated that it prioritizes resolving the Iran issue through diplomatic means but does not rule out the option of new military actions. International oil prices have slightly declined.Crude Oil FuturesWTI crude oil futures for the June contract fell by $0.89/bbl to $107.77, down 0.82% month-on-month; ICE Brent crude oil futures for the July contract fell by $0.82/bbl to $111.28, down 0.73% month-on-month. China’s INE crude oil futures for the 2607 contract rose by 1.5 to 673.8 yuan/bbl, and the night session rose by 16.2 to 690 yuan/bbl.

Market Forecast

Signs of tightening supply and shortages in the crude oil market are becoming increasingly evident. Data show that Iraq’s crude oil exports in April have fallen to only one-tenth of their pre-war level. Overnight, API data showed U.S. crude inventories dropped by a massive 9 million barrels, with the pace of inventory draws accelerating. Last week, U.S. Strategic Petroleum Reserve withdrawals hit a record high, bringing total inventories to a two-year low. Previously, IEA Executive Director Fatih Birol said commercial oil inventories were shrinking rapidly, leaving only a few weeks’ worth of supply. Therefore, any geopolitical ripple that could affect supply will make the market nervous.

For Trump, there is not much time left to allow the stalemate with Iran to continue. While Iran appears to have made slight concessions, it is expected to be very difficult for it to make further compromises on its core principled demands, and it is hard to imagine how an agreement can be reached on these points of divergence. Whether Trump can agree will play a key role in the direction of the state of war between the U.S. and Iran. The answer will come in the next few days. Uncertainty over the geopolitical situation makes oil prices prone to sharp fluctuations, so pay attention to timing and strengthen risk control.

II. Macroeconomic Dynamics

1、Trump: Walsh can do whatever he wants; other measures may be introduced to lower gasoline prices.

2. The Thai Cabinet has decided to cancel the 60-day visa-free policy.

Samsung and the union negotiated for 15 hours without results, will continue on Wednesday.

4. The U.S. SEC lowers the threshold, aiming to “make IPOs flourish again.”

5、Fed funds futures show a 75% probability that the Federal Reserve will raise interest rates by the end of the year.

The Trump administration plans to reduce NATO crisis response forces and asks Europe to take on the lead in security.

7、Japanese Finance Minister Satsuki Katayama: We are prepared to take decisive action in the foreign exchange market.

8、Sources say Indonesia plans to tighten export controls on commodities such as coal and palm oil.

9. Chilean Copper Commission: It is expected that Chile's copper production will decrease by 2% in 2026 and increase by 4% in 2027.

10. Situation in the Middle East—

①Trump: We may have to strike Iran again.Agree to give Iran another 2 to 3 days, maybe until Friday or Saturday, or perhaps early next week; time is limited.

②Mediators believe there has been little to no progress in the U.S.-Iran talks, as Iran remains firm on its core demands. The U.S. vice president said the negotiations have made “significant progress,” but that a Plan B has been prepared.

③ NATO official: If the Strait of Hormuz is not open by early July, forces may be deployed to provide escorts.

11. According to CCTV News: On the evening of May 19,Russian President Vladimir Putin arrived in Beijing by special plane.

12、According to the official website of the China Securities Regulatory Commission, Yangtze Memory Technologies has begun IPO counseling.

13. Ministry of Foreign Affairs: China and the United States have agreed to hold intergovernmental dialogue on artificial intelligence.

3. Plastics Futures Market Trends

Oil prices fluctuated within a narrow range intraday, while the main domestic plastics futures contracts were mostly up with some declines.

The plastic 2609 contract is quoted at 8111 yuan/ton, an increase of 1.06% compared to the previous trading day.

The PP2609 contract was quoted at 8,995 yuan/ton, up 1.55% from the previous trading day.

The PVC2609 contract is quoted at 4,990 yuan/ton, down 1.15% from the previous trading day.

The Styrene 2605 contract was quoted at 9,389 yuan/ton, up 0.96% from the previous trading day.

IV. Market Forecast

PE: As some maintenance units gradually resume operations in the later stage, market supply will increase. On the demand side, downstream demand is entering the off-season, and support for the market will weaken in the future. Therefore, in the short term, domestic polyethylene market prices still have room to decline.

PP: Operating rates generally declined due to insufficient downstream orders and pressure from finished product inventories. High raw material prices are squeezing the profit margins of downstream product manufacturers, leading to a negative feedback effect from elevated prices. However, tight supply and persistently high costs continue to support the price floor.Polypropylene priceMaintain high-level consolidation, with limited downside, expected to...Polypropylene marketPrices fluctuated within a range, with the mainstream drawing-grade prices in East China at RMB 9,650–9,800/mt.

PVC: The current PVC market trade is mainly characterized by abundant supply, as production cuts are offset by still-high inventories, while demand remains weak. With the upcoming rainy season and traditional off-season, the supply-demand imbalance is expected to persist, and the pressure to destock industry inventories is greater than in previous years. On the upstream cost side, support for the ethylene-based process remains weak, while the carbide-based process is relatively firm but still shows a downward tendency as maintenance activities increase. Policies and macro factors have had an unfavorable impact on the upstream sector. Overall, spot market prices are likely to trend lower under supply and demand pressure, while in the short term they are expected to fluctuate within a range due to regional sentiment.