Geopolitical pricing versus negative demand feedback in a tug-of-war: energy and chemicals sector to keep a close eye on two major variables in the outlook

In October, the energy and chemicals sector experienced a "sharp rallyhigh-level tug-of-warsecond surge" pattern as geopolitical risk premiums played out repeatedly. Among them, crude oil was the absolute main thread; chemicals showed marked divergence, with some varieties experiencing violent price swings while others continued to grind along the bottom amid negative demand feedback. Looking ahead to November, multiple interviewees said the tug-of-war between geopolitical pricing and negative demand feedback will persist, with the Middle East situation and market demand being the two main threads affecting the energy and chemicals sector's outlook. On crude oil fundamentals, Fan Chunhua, head of the energy and chemicals team at Guoxin Futures, summarized current supply and demand as "physical supply constrained by geopolitics and logistics, global low inventories providing a floor, high oil prices cannibalizing demand, and risk premiums dominating pricing"the essence of which is a "deliverability" premium rather than a total-volume gap. On the demand side, negative feedback caused by geopolitical risk has fully manifested. Fan Chunhua noted that China's September crude throughput fell 8.4% year-on-year; MTO losses deepened and plant shutdowns increased, float glass daily melting capacity continued to decline; polyester operating rates are at multi-year lows, Jiangsu-Zhejiang loom utilization is only 53%, and the terminal market shows "a peak season that isn't peak."