Sino-European Talks Focus on Nexperia! International Oil Prices Rebound with Over 1% Gains, PVC Futures and Spot Markets Still at Risk of Hitting New Lows

1. Overnight Crude Oil Market Dynamics

Although U.S. commercial crude oil inventories have increased, the market is still watching and assessing the latest developments in the Russia-Ukraine situation, leading to a rise in international oil prices. NYMEX crude oil futures for the January contract rose by $0.70 per barrel to $58.65, a 1.21% increase compared to the previous period. ICE Brent crude oil futures for the January contract rose by $0.65 per barrel to $63.13, a 1.04% increase compared to the previous period. China's INE crude oil futures for the 2601 contract fell by 4.6 to 442.8 yuan per barrel, and during the night session, it rose by 3.5 to 446.3 yuan per barrel.

Market Forecast

On Wednesday, the oil price ultimately closed higher, which may have surprised many investors, as the price had shown weakness for most of the time. It wasn't until 2:15 AM when Baker Hughes released the latest data showing that the total number of oil drilling rigs in the U.S. unexpectedly dropped by 12 to 407 for the week ending November 28, down from the previous count of 419. This made investors realize once again that low oil prices are beginning to suppress shale oil production activities in the U.S. Following this, oil prices saw the largest intraday rebound and ultimately closed higher.

For the fourth consecutive trading day, oil prices have maintained a sideways tug-of-war pattern, indicating that bets from capital are very cautious, primarily due to the pending outcome of the Russia-Ukraine peace situation. The United States proposed a peace plan for Russia and Ukraine, which is a clearly bearish factor, so capital is primarily considering the bearish possibility. As a result, although the situation remains uncertain, capital will not easily pursue price increases unless signs of a breakdown in talks emerge. However, so far, neither side has made any statements on this matter.

On Wednesday, Kremlin spokesman Peskov stated that it is premature to draw conclusions about the upcoming end of the Ukraine conflict. It is still too early to say that a peace agreement for Ukraine is imminent. Russian presidential aide Ushakov indicated that the Russian side has not formally received the U.S. proposed "peace plan" for Ukraine but has obtained text materials through informal channels. He stated that Russia has not discussed the specific details of the U.S. "peace plan" with any party, and several provisions need to be examined in depth. Ushakov mentioned that Russia holds a positive attitude towards some content in the U.S. "peace plan," but many issues still require negotiation. Ushakov revealed that the Russian side has obtained multiple versions of the U.S. "peace plan" through informal channels, and the content system even contains contradictions.

Although the final outcome of the negotiations on the Russia-Ukraine peace framework plan still requires time to provide an answer, the most noticeable market change during the period following the emergence of this topic is the rapid decline in the crack spread profits of refined oil products, such as European diesel. This is due to seasonal factors and also helps to alleviate market concerns about supply. Additionally, on the geopolitical front, regarding Venezuela, currently, after the military build-up, Trump's primary consideration is to pressure Maduro into submission, with no signs of risk escalation for the time being. The operation of oil prices remains in a stage of high uncertainty, so it is important to strengthen risk control and participate cautiously.

Section 2: Macroeconomic Trends

Minister of Commerce Wang Wentao held a video conference with European Commission's Trade and Economic Security Commissioner Maroš Šefčovič to discuss in-depth issues related to Nexperia Semiconductor and other trade matters. Both parties agreed that businesses are the main entities in resolving the Nexperia Semiconductor issue and will jointly urge Nexperia Netherlands and Nexperia China to engage in constructive communication as soon as possible, find a long-term solution, and quickly restore the smoothness and stability of the global semiconductor supply chain. The two sides also exchanged views on issues such as EU-China export controls.

Six departments jointly issued the "Implementation Plan on Enhancing the Supply-Demand Compatibility of Consumer Goods to Further Promote Consumption," which outlines 19 key tasks across five areas, including expanding increments, deeply tapping stock, and enabling scenarios. The goal is to significantly optimize the supply structure of consumer goods by 2027, forming three trillion-yuan-level consumption sectors and ten hundred-billion-yuan-level consumption hotspots.

The Federal Reserve's Beige Book indicates that, according to reports from most of the 12 districts, economic activity has remained essentially flat since the last report; however, two districts noted a slight decline in the economy, while one district reported a slight increase. The overall outlook has remained largely unchanged, with some individuals pointing out an increased risk of economic activity slowing down in the coming months.

The number of initial jobless claims in the United States decreased by 6,000 to 216,000 last week, marking the lowest level since mid-April and below the expected value of 225,000. The number of continuing jobless claims from the previous week slightly increased to 1.96 million.

In September, the preliminary value of U.S. durable goods orders increased by 0.5% month-on-month, a significant slowdown compared to the revised previous value of 3%. Excluding aircraft, the preliminary value of non-defense capital goods orders (core capital goods orders) increased by 0.9%, far exceeding the market expectation of 0.3%, with the previous value revised from 0.4% to 0.9%.

Canadian Prime Minister Carney stated that Canada will reduce the steel import quota from non-free trade agreement partners from 50% in 2024 to 20%; Canada will impose a 25% global tariff on certain imported steel derivative products.

The Japanese government plans to abolish the system of exempting small imported goods priced below 10,000 yen from consumption tax and instead require e-commerce platforms selling goods to pay consumption tax. The tax targets are companies with domestic sales of goods exceeding 5 billion yen in Japan.

Section 3: Early Morning Dynamics of the Plastic Market

Oil prices rebounded at midnight! Overnight, the main contracts of domestic plastic futures mostly increased with few declines.

The plastic 2601 contract is quoted at 6730 yuan/ton, down 0.15% from the previous trading day.

The PP2601 contract is reported at 6301 yuan/ton, up 0.06% from the previous trading day.

The PVC2601 contract was quoted at 4502 yuan/ton, up 0.38% compared to the previous trading day.

The styrene 2601 contract is priced at 6548 yuan/ton, an increase of 0.83% compared to the previous trading day.

IV. Market Forecast

PE: The downstream products industry shows a mixed performance but is generally weak. Traditional sectors such as packaging films and agricultural films are seeing insufficient follow-up on orders, with companies mostly replenishing inventory based on existing orders and exhibiting low willingness to make proactive purchases. Although logistics packaging benefits from the rigid demand of e-commerce, it struggles to offset the overall demand gap, while sectors like pipe and injection molding are affected by the slow recovery of the terminal industry, limiting new orders. This demand pattern of "rigid demand underpinning but lacking incremental growth" keeps market purchasing enthusiasm consistently low, further exacerbating supply-demand contradictions. The current market is not lacking a rigid demand foundation but rather suffers from a mismatch between the pace of demand release and the speed of supply growth, with downstream cautious sentiment forming a negative feedback loop. Overall, the core contradiction of supply-demand imbalance is unlikely to be quickly alleviated in the short term; the pattern of abundant supply and weak demand will continue to dominate the market. It is expected that the polyethylene market will maintain a volatile and weak trend in the short term.

PP: The overall performance of downstream industries is lackluster. Traditional sectors such as plastic packaging and pipes are being dragged down by a sluggish real estate market and weak exports, resulting in long-term low operating rates. Although there has been a short-term order boost in packaging materials during e-commerce promotional events, the sustainability is insufficient, and inventory accumulates rapidly after the holiday. Only niche areas driven by new energy vehicles and high-end home appliances, such as modified PP, show structural demand highlights, but their limited market share makes it difficult to change the overall situation. Currently, the purchasing enthusiasm of downstream enterprises is generally low, only maintaining essential demand purchases, and the inventory consumption pace is slow. Meanwhile, industry operations are stable, and the continuous release of new capacity further exacerbates the supply-demand imbalance. In summary, the short-term market supply-demand conflict is unlikely to be substantially alleviated, with the traditional demand off-season approaching. The demand highlights in some niche areas have limited impact on the overall market. It is expected that the polypropylene market will maintain a weak and volatile trend in the short term.

PVC: Taiwan's Formosa Plastics has lowered the price of its December PVC export cargoes, with FOB Taiwan prices down by $50 to $570, CFR prices for delivery to Mainland China down by $30 to $640, and CFR prices for delivery to India down by $60 to $660. Currently, both regional traders' offers and upstream manufacturers' ex-factory prices are at historically low levels, leading to some stockpiling in the spot market recently. However, at this point in time, we believe that both the futures and spot markets are still under certain operational pressure. Although the spot market may continue to adjust narrowly at low levels in the short term, there is still an expectation of new lows in both markets due to a fundamentally weak backdrop.