60 Million Barrels of Crude Oil Flow into Asia! Can the Cost Pressure on Textile Factories Be Alleviated?

Recently, Saudi Arabia has completed a large-scale crude oil export arrangement, with approximately 60 million barrels of crude oil departing from the Ras Tanura port in the Strait of Hormuz, and delivered through a ship-to-ship transfer at Oman’s Sohar port. This batch of spot cargo is mainly supplied to refineries in China and South Korea, while the remaining supply is diverted to consumer markets in India, Japan, and other parts of Asia. Data shows that Saudi Aramco’s crude oil exports from the Gulf region have rebounded to 1 to 1.5 million barrels per day, with shipment volumes at or slightly above the levels seen in August.

☑ The increase in crude oil supply brings marginal benefits to the upstream of the chemical fiber industry.

China’s textile industry system is extensive, and synthetic fibers occupy a very high proportion of the raw material structure. Mainstream chemical fiber categories such as polyester, nylon, and spandex all originate from the petroleum refining system. Crude oil is first cracked to obtain naphtha, which is then further processed into key chemical intermediates like PX, PTA, and ethylene glycol, eventually becoming the polyester filament and staple fiber purchased by textile mills, forming the material basis for the operation of countless looms.

The recent release of 60 million barrels of crude oil into the Asian market will most directly benefit regional refining enterprises. Stable crude oil arrivals help refineries maintain a reasonable operating load and ensure the supply of upstream chemicals for synthetic fibers, to some extent reducing the risk of sudden raw material shortages. Logically, securing the supply side can help mitigate the surge in synthetic fiber raw material prices caused by short supply, thereby creating a relatively stable raw material environment for the downstream textile industry.

An increase in crude oil spot arrivals does not necessarily mean that the price of chemical fiber raw materials will directly fall. International oil prices are simultaneously influenced by multiple factors, including geopolitical situations, oil-producing countries’ policies, and global consumption demand. Even if spot supply increases, if international crude oil prices remain high, costs will still be passed on to downstream sectors. This round of Saudi crude oil exports represents more of a marginal improvement in supply rather than a direct ‘price reduction benefit.’

⚠ There is a time lag in transmission, making small and medium-sized textile enterprises more prone to passivity.

Between crude oil and textile fabrics, there are multiple stages including refining, chemical processing, and trade, and the transmission of market trends experiences a significant lag. The purchase price of raw materials in workshops does not change immediately upon the arrival of crude oil at the port; it often takes several weeks or even months for the impact to gradually manifest.

The ability to cope with fluctuations varies greatly among textile companies of different scales. Large textile groups and leading polyester chemical companies can rely on long-term supply agreements to lock in purchase prices and use reasonable inventory adjustments to hedge against short-term market volatility. However, most small and medium-sized weaving and dyeing factories in the market adopt a spot purchase model, sourcing as needed, which makes them highly sensitive to raw material price changes.

Many small and medium-sized operators focus primarily on fabric market trends and downstream orders in their daily operations. They are accustomed to closely monitoring the real-time prices of PTA and polyester filament, yet often overlook advance signals from the crude oil end. They frequently wait until the prices of chemical fiber raw materials have already increased, passively accepting higher costs and falling into the dilemma of chasing rises and selling off in falls. When the market is favorable, they blindly stockpile goods, but when the market cools, they bear the risk of high inventory capital occupation. The current recovery in crude oil exports should be seen as a warning window for the industry, reminding practitioners to extend their observation to the upstream of the industrial chain.