SunSirs: Middle East Unrest Disrupts Imports, Impacting Methanol and Other Chemical Supplies

The passage through the Strait of Hormuz will be a more critical factor affecting the supply of Middle Eastern crude oil, methanol, liquefied petroleum gas (LPG), and other chemical products.

Connecting the Persian Gulf and the Gulf of Oman, the strait serves as the vital export route for crude oil from Middle Eastern producers including Saudi Arabia, Iraq, Qatar, and the United Arab Emirates. At its narrowest point, this 39-kilometer waterway handles 20% to 30% of the world's seaborne crude oil trade, with approximately 18 million barrels of crude oil passing through daily.

Following the U.S.-Israel strikes on Iran, Tehran announced the closure of the Strait of Hormuz shipping lanes. Multiple tanker owners and traders have suspended crude oil, fuel, and liquefied natural gas shipments through the strait.

A prolonged closure of the Strait of Hormuz would rapidly widen the global crude oil supply gap. With China relying on imports for over 70% of its crude oil, the risk of passive reductions and delayed arrivals in short-term imports has increased, posing a threat of sustained oil price hikes.

Beyond crude oil, Iran is the world's second-largest methanol producer, with China as its primary buyer. Given the difficulty in filling such a massive gap with non-Iranian sources in the short term, China's domestic methanol port inventories will accelerate depletion. Prices may experience a supply-driven surge, subsequently impacting the downstream olefins (PP/PE) industry chain. Next are aromatics, olefins, and polyester. While direct imports of aromatics and olefins from Iran are relatively low, imports of ethylene glycol from Saudi Arabia, Iran, and Oman account for a significant proportion. Furthermore, Iran is the world's fourth-largest LPG exporter and a key supplier of high-sulfur fuel oil to China. Iran is also a major global producer of polyethylene (PE), with China as its primary buyer.

Should the conflict persist for an extended period, it would significantly impact prices of crude oil, methanol, LPG, liquefied natural gas, fuel oil, polyethylene, and other chemical products.

This geopolitical conflict is expected to trigger substantial volatility in Brent crude oil prices and considerable gains in the chemical sector.

Domestic fuel oil futures are anticipated to sustain upward momentum during trading sessions, with geopolitical risk premiums likely to be rapidly realized. A direct limit-up opening cannot be ruled out. Asphalt lacks independent price dynamics and fully tracks crude oil and geopolitical fluctuations. Under the dual influence of strong geopolitical sentiment and cost support, its price elasticity is expected to be weaker than fuel oil's. However, it will maintain an overall strong bullish pattern with no basis for significant corrections. Future movements will continue to closely follow crude oil and Middle East developments. Methanol is also anticipated to open significantly higher, as this conflict significantly impacts methanol and may continue to escalate. The LPG market may open strong but decline later; monitor strait navigation conditions after the opening surge.

Geopolitical crises amplify volatility in energy and chemical markets.

As an integrated internet platform providing benchmark prices, on March 2, SunSirs' benchmark methanol price was 2200.00 RMB/ton, unchanged from the beginning of the month.

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