Surging Crude Oil Prices Drive up Propylene Prices
Introduction: On June 13, crude oil prices rose greatly, giving stronger cost support for the propylene market, followed by an increase in propylene prices. Short-term oil prices may fluctuate at highs but are unlikely to sustain the upward trend in the long run. Meanwhile, propylene prices may lack the conditions for continuous growth.
The escalation of geopolitical tensions in the Middle East intensified concerns over oil supply, triggering a sharp surge in international oil prices during early trading on June 13. At one point, WTI crude oil prices rose above $76/bbl, marking a 12% increase, while Brent crude oil prices approached $78/bbl, up 10%.
As one of the major feedstocks for propylene, the sharp rise in crude oil prices gave cost support for propylene prices, so propylene producers tended to maintain prices amid favorable market sentiments. As of June 13, propylene prices in the Shandong market rose to RMB 6,410-6,460/mt, up RMB 65/mt or 1.02% from the previous trading day.
Since 2014, propylene price fluctuations narrowed notably, with daily price fluctuations in Shandong ranging between RMB 10-20/mt. A daily amplitude of RMB 65/mt was considered relatively notable. In addition, in H1 2025, domestic propylene capacity expanded quickly, exerting long-term supply pressure on propylene prices. Especially after mid-May, cost support from feedstock propane weakened amid the easement of Sino-U.S. tariff policies, and the PDH operating rate rose, exerting sales pressure on propylene producers, so propylene prices went down constantly. On June 12, propylene demand turned favorable slightly with downstream plants engaging in bargain-hunting, driving up propylene prices. However, propylene prices may go down amid insufficient purchasing positivity and ample supply. On June 13, crude oil prices surged, leading propylene producers to tentatively raise prices, and sales at propylene producers improved as some downstream plants and traders purchased due to panic sentiments. In this context, propylene prices in Shandong may rise on weekend.
However, short-term crude oil prices may fluctuate at highs, but unlikely sustain the upward trend in the long run. Historical patterns show that geopolitical conflicts in the Middle East often trigger a short-lived surge in oil prices-typically around $5/bbl, lasting roughly three days. Unless the event is exceptionally sudden and severe (leading to sharper price spikes), The market has largely priced in such risks in advance. As involved parties respond and the situation stabilizes, oil prices will gradually pull back. While the recent Israel incident did trigger a noticeable spike in crude prices, oil prices had already been on a sustained upward trend with considerable cumulative gains. The event’s impact has largely been exhausted-though vigilance against potential large-scale escalation remains warranted.
For the propylene market, rising oil prices may drive up propylene prices. However, current propylene supply is ample, and downstream purchases may be hard to sustain, so propylene prices may lack an upward trend. Should oil price increases narrow, propylene prices may lack sustained upward momentum. Against the current backdrop of supply pressure, any weakening in market support may trigger a partial or complete retracement of recent price increases.
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