Focus on us-russia summit and opec monthly report: International Oil Prices Rise, Domestic Plastic Futures Main Contracts Mostly Follow Suit Overnight

1. Overnight Crude Oil Market Dynamics

International oil prices have risen as the market watches the developments in the Russia-Ukraine situation, coupled with short covering by traders. NYMEXCrude oil futuresThe September contract is at $63.88 per barrel, holding steady compared to the previous working day; ICE Brent crude oil futures October contract is at $66.59, up $0.16 per barrel, a 0.24% increase from the previous period.

Market Outlook

2. Macroeconomic Developments

According to data from the National Immigration Administration, the number of foreign entries and exits exceeded 38 million in the first half of this year, a year-on-year increase of 30.2%. Among them, the number of visa-free foreign visitors reached 13.64 million, a year-on-year increase of 53.9%. As the summer holiday approaches, the number of South Korean tourists traveling to China continues to rise. Statistics from South Korea's largest travel agency show that cities such as Qingdao and Yantai in Shandong Province, Yancheng in Jiangsu Province, and Kunming in Yunnan Province are all very popular destinations.

President Xi Jinping of China spoke with Russian President Vladimir Putin on the phone at the latter's invitation. Xi expressed that China is pleased to see Russia and the United States maintain contact, improve their relations, and promote the political resolution process of the Ukraine crisis.

In response to US President Trump's statement that secondary sanctions might be imposed on China for purchasing Russian oil, Foreign Ministry spokesperson Guo Jiakun stated that China's normal economic and trade energy cooperation with countries around the world, including Russia, is legitimate and lawful. We will continue to take reasonable measures to ensure energy security based on our national interests.

The State Administration of Foreign Exchange announced that in the second quarter, China’s current account surplus was 135.1 billion US dollars, including a goods trade surplus of 219.1 billion US dollars, a services trade deficit of 46.5 billion US dollars, a primary income deficit of 41.4 billion US dollars, and a secondary income surplus of 4.0 billion US dollars. The capital and financial account recorded a deficit of 135.1 billion US dollars.

The White House is considering inviting Ukrainian President Zelensky to Alaska. Currently, the White House is focused on preparing for the bilateral summit proposed by President Putin. The Ukrainian government has yet to comment on this. Previously, U.S. President Trump announced that he would meet with Russian President Putin on August 15 in the state of Alaska. This will be the first in-person meeting between U.S. and Russian leaders in four years.

Federal Reserve Governor Bowman stated that core Personal Consumption Expenditures (PCE) inflation appears to be moving closer to the 2% target than the data suggests. He believes it is appropriate to disregard temporarily elevated inflation. Additionally, he supports three rate cuts this year.

U.S. President Trump stated that the U.S. and Russia are "very close" to reaching an agreement on the Ukraine issue. He revealed that he will announce the meeting location with Russian President Putin, and both sides are making arrangements for it.

U.S. Treasury Secretary Besent is leading the search for the next Federal Reserve Chair. The team will expand the selection scope for the Fed Chair candidates to include new names on the list. New candidates include former St. Louis Fed President James Bullard and former George W. Bush advisor Mark Sumerlin.

◎Personnel changes at the Federal Reserve have triggered adjustments in policy expectations. JPMorgan currently expects that, given signs of weakness in the US labor market and risks surrounding Trump's latest Fed appointments, the Federal Reserve will cut interest rates by 25 basis points as early as its September meeting, followed by three more 25-basis-point cuts, and then pause indefinitely.

Huw Pill, the Chief Economist of the Bank of England, stated that inflationary pressures might continue to weaken, but there is a risk that longer-term pricing and wage-setting behaviors in the economy could change, potentially delaying future interest rate cuts.

According to data from the United Nations Food and Agriculture Organization, the FAO Food Price Index averaged 130.1 points in July, up 1.6% from June, marking the highest level since February 2023.

3. Morning Market Trends of Plastics

Traders' short covering leads to a rise in international oil prices! Overnight, most of the main domestic plastic futures contracts saw slight increases.

The plastic 2509 contract is reported at 7,295 yuan/ton, up 0.07% compared to the previous trading day.

The PP2509 contract was quoted at 7,074 yuan/ton, up 0.17% from the previous trading day.

The PVC2509 contract is reported at 4997 yuan/ton, up 0.08% from the previous trading day.

The styrene 2507 contract was quoted at 7,230 yuan/ton, down 0.07% from the previous trading day.

4. Market Forecast

The PE market trend will be influenced by multiple intertwined factors. As the main contract nears the month-switching period, uncertainties in the futures market are significantly increasing, which may amplify fluctuations in the spot market. The traditional consumption peak season, "Golden September and Silver October," is expected to gradually permeate the market and potentially boost the demand side. However, considering the current continuation of the downstream weakness, the actual momentum during the peak season still needs observation. Overall, in the short term, the market is expected to maintain a range-bound consolidation pattern. The core focus will be the game between uncertainties in the futures market and expectations for the peak season. Spot prices may exhibit a tug-of-war under the support of tight supply and the pressure of weak demand. Close attention should be paid to plant dynamics, inventory changes, and signals of the downstream peak season initiation to guide market sentiment.

In the current PP market, domestic production facilities that had halted operations have not resumed large-scale production, and the Guoneng Xinjiang facility has stopped operations today, resulting in a continued tight supply situation. Downstream purchases are primarily based on actual demand, providing limited support. The futures market has seen a narrow decline and weak fluctuations, with the domestic polypropylene dollar market showing overall stability with slight fluctuations. The domestic spot market is in a phase of range-bound consolidation, with weak terminal demand support and stable quotations from traders. Overall, as the main contract switches months, uncertainty in the futures market increases. The dynamics of supply facilities, the extent of downstream demand release, coupled with the continued development of macro-level positive and negative factors, will jointly guide the market direction. If the supply-demand structure does not change significantly, it is expected that the polypropylene market will continue with range-bound consolidation in the short term, with potential increased volatility in futures and spot prices adjusting accordingly. The room for actual transaction concessions may vary with market sentiment and transaction conditions. Close attention is needed on the progress of facility restarts, downstream operations, and macro policy impacts on the market.

PVC: The high fixed price is difficult to transact, and downstream purchasing enthusiasm is generally low, leading to mediocre spot market transactions. There are no significant changes in the supply and demand dynamics of PVC. On the international front, oil prices have been declining amid volatile trading due to rising expectations that the Russia-Ukraine conflict might be resolved through diplomatic means. Additionally, uncertainties surround U.S. tariffs, sanctions on Russia, and the impact of production increases by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). Overall, in the short term, the PVC spot market is expected to continue with narrow fluctuations.