Petrochemical prices fluctuate amid ongoing conflict and supply chain risks

Geopolitical conditions and supply-demand balances affect petrochemical prices

Prices of raw materials including oil and gas liquids, chemical and petrochemical products, and fertilizers experienced fluctuations in June amid the ongoing conflict in the Middle East, increasing supply chain risks, rising shipping costs, and supply-demand balances, with notable declines in naphtha, urea, vinyl acetate monomer, methanol, styrene, and diammonium phosphate, while Saudi Aramco reduced propane and butane prices.

Naphtha prices, a component in gasoline production and a petroleum liquid used in the petrochemical industry, fell 14.6% month-on-month in June to $645 per ton, while propane and butane, natural gas liquids for petrochemical production, rose to $760 and $820 per ton respectively.

Aramco cut propane and butane prices in July to $580 and $600 per ton respectively. According to Al Jazeera Capital, urea prices dropped 30.4% month-on-month to $400 per ton due to increased supply and weak demand.

Vinyl acetate monomer prices fell 21.6% month-on-month to $1,000 per ton due to lower refinery product consumption and improved product availability. Methanol prices declined 20.5% month-on-month to $310 per ton due to weak demand amid growing concerns over refinery sector activities.

Styrene prices decreased 19.6% month-on-month to $965 per ton due to lower feedstock and energy costs, along with persistent weak demand. Ethylene vinyl acetate prices fell 18.3% month-on-month to $1,230 per ton due to lower ethylene prices and weak demand.

Regarding petrochemical product margins, the polypropylene-propane margin fell in June to $558 per ton from $657 per ton in May. The polypropylene-butane margin also declined to $510 per ton from $617 per ton in May. The high-density polyethylene-naphtha margin rose to $415 per ton in June from $286 per ton in May.

The agreement between the United States and Iran led to a drop in crude oil prices, but prices began to recover in early July amid renewed attacks. Brent crude fell sharply in June due to a lower war risk premium after a ceasefire agreement.

A significant decline in geopolitical risk premiums led to a large monthly drop in crude oil prices after the US and Iran signed a framework agreement to fully reopen the Strait of Hormuz. Prices fell to a low of $73 per barrel.

In contrast, tensions in early July due to renewed strikes in the Strait of Hormuz and the deterioration of the security situation after Iran launched new attacks rekindled concerns about global supplies and increased doubts about the durability of the peace process. Brent crude fell 21.8% month-on-month in June to $72.0 per barrel. West Texas Intermediate crude fell 20.8% over the same period to $69.2 per barrel.

Henry Hub natural gas prices fell 1.8% month-on-month to $3.2 per million British thermal units. Major global economies maintained strong manufacturing activity in June, but growth momentum slowed slightly. The Caixin manufacturing PMI dipped slightly to 51.7 from 51.8, supported by continued growth in new orders for 13 consecutive months and slower inflation.

The Hamburg Commercial Bank manufacturing PMI for the eurozone fell to 51.4 from 51.6 due to supply chain disruptions and weak orders despite higher output. In contrast, the Institute for Supply Management's US manufacturing PMI fell to 53.3 from 54.0, supported by strong production and orders, despite uncertainty related to tariffs and price volatility from geopolitical tensions.

In global crude oil supply developments, the US Energy Information Administration expects global crude oil and liquid fuels supply to decline by 4.2 million barrels per day (bpd) in 2026 to 101.9 million bpd (versus a previous forecast decline of 4.8 million bpd), and expects supply to increase by 8.0 million bpd in 2027 (versus a previous forecast of 7.9 million bpd).

Non-OPEC oil supply is expected to stabilize around 76.8 million bpd in 2026, then rise by 3.1 million bpd to 79.9 million bpd in 2027.

Global oil supply fell by 0.6 million bpd in May to 94.5 million bpd, according to the International Energy Agency. Global supply is expected to decline by 3.9 million bpd in 2026 to 102.4 million bpd.

In OPEC supply, crude oil production from OPEC member countries fell by 0.18 million bpd in May from the previous month to 18.8 million bpd, according to external sources. The US Energy Information Administration expects average crude oil production from OPEC member countries in Q3 2026 to reach 20.3 million bpd (versus 17.1 million bpd in Q2 2026).

The EIA expects OPEC crude oil production to average about 21.1 million bpd in 2026 and 24.9 million bpd in 2027. According to the EIA, average unplanned supply outages among OPEC member countries in June were 9.87 million bpd (versus 12.00 million bpd in May).