February Petroleum and Chemical Industry Prosperity Index
1. Overview of the Petroleum and Chemical Industry Prosperity Index
The business climate index for the oil and gas extraction industry was 85.99, a decrease of 12.36 percentage points month-on-month. In the past two months, influenced by geopolitical tensions, crude oil prices have continued to rise. However, current crude oil prices carry a significant risk premium, coupled with the previous six-month period of "price decline and profit shrinkage," leading companies to question the sustainability of the crude oil price recovery and maintain a cautious production decision. Changes in inventory turnover reflect the end of the phased destocking in January. With rising crude oil prices, companies may be holding onto inventory in anticipation of further price increases, and coupled with the approaching Spring Festival, downstream demand is expected to decrease, resulting in a slowdown in inventory reduction.
The business climate index for the fuel processing industry was 102.18, a decrease of 1.94 percentage points month-on-month. The fuel processing industry exhibits slight differences among products. Diesel end-user consumption hit a new low for the traditional annual trough, highlighting the imbalance between supply and demand. While gasoline demand was supported by short-term travel during the Spring Festival holiday, it quickly declined afterward.
The prosperity index for the chemical raw materials and chemical products manufacturing industry was 105.63, a decrease of 1.71 percentage points month-on-month. The moderate recovery in upstream crude oil prices has not yet pushed up raw material costs, and downstream chemical product prices remain relatively firm, maintaining profit margins. However, production activity decreased due to plant shutdowns and maintenance during the Spring Festival holiday, and downstream new purchases decreased, resulting in an accumulation of finished product inventory and a decline in the industry's prosperity index.
The manufacturing prosperity index for rubber, plastics, and other polymer products was 107.35, a decrease of 3.54 percentage points month-on-month. In January, the industry's prosperity rose due to both raw material cost advantages and seasonal stockpiling demand. However, in early February, downstream stockpiling slowed as the Spring Festival approached, and post-holiday demand recovery was slow in the latter half of the month. Reduced new orders led to increased inventory, causing the industry prosperity index to decline. Currently, the industry is in a phase of inventory digestion, and its future prosperity will depend on the recovery of domestic and international demand.
2. Hotspot Analysis and Future Outlook
2.1 Escalating Geopolitical Tensions in the Middle East and Rising Crude Oil Prices
In February, geopolitical tensions in the Middle East escalated sharply, becoming the main driver of rising crude oil prices. On February 28, the United States and Israel launched airstrikes on Tehran, the capital of Iran, and the Iranian Islamic Revolutionary Guard Corps subsequently announced the closure of the Strait of Hormuz, a vital global oil transportation route. This event marked a shift from "trade expectation" to "trade reality" in geopolitical conflict, triggering serious market concerns about disruptions to crude oil supply. As a result, oil prices rose rapidly, and the geopolitical risk premium increased significantly. It is estimated that current oil prices already include a risk premium of approximately $8-10 per barrel. Furthermore, a significant proportion of petrochemical products such as Polyvinyl Alcohol (PVA), Polyvinyl Butyral Resin (PVB), and fuel oil are transported through the Strait of Hormuz annually; the continuation of the conflict will inevitably affect the prices of these related products.
2.2 Sluggish Production, Strong Consumption, and Slow Inventory Replenishment
This year, benefiting from the longest Spring Festival holiday in history, cross-regional travel demand for family visits and tourism was concentrated, leading to frequent highway traffic peaks and directly boosting gasoline consumption. However, in stark contrast to the surge in residential travel, industrial and infrastructure production activities generally slowed down during the Spring Festival, with diesel consumption entering its traditional annual low period. Daily consumption declined significantly compared to the previous period, and refinery and social inventory pressures continued to increase.
During the Spring Festival consumer market, sales of home appliances and 3C digital products were brisk, providing a temporary boost to demand for related petrochemical raw materials in the upstream rubber, plastics, and other polymer product manufacturing industries, improving industry expectations for post-holiday market performance. However, with the end of the holiday, restocking intentions weakened, and terminal distributors generally entered a destocking cycle, leading to a marginal slowdown in new orders for petrochemical companies. Overall, February was characterized by hot travel, sluggish production, strong consumption, and slow restocking, clearly demonstrating the inherent logic of differentiation within the petrochemical industry and a general correction in its overall prosperity.
3. Outlook for the Oil and Chemical Industry
In March 2026, the oil and chemical industry will continue to be affected by macroeconomic factors, costs, and demand. On the macro level, the National People's Congress and the Chinese People's Political Consultative Conference (NPC and CPPCC) will release a series of policy signals, pointing the way for market trends in 2026. Regarding crude oil prices, if the geopolitical tensions in the Middle East do not ease and the Strait of Hormuz remains closed, crude oil risk premiums and high volatility are expected to continue in March, potentially leading to further price increases. On the demand side, the resumption of work and production in downstream industries after the Spring Festival was slow, and rising crude oil prices further squeezed the profits of the petrochemical industry. End-user companies maintained only essential purchases and lacked the motivation for concentrated restocking. Whether the previous restocking demand from midstream and downstream industries based on cost advantages can be successfully converted into end-user consumption, and whether the traditional peak season of "Golden March and Silver April" can arrive as scheduled, are key to the recovery of the industry's prosperity. Based on a comprehensive assessment of historical seasonal patterns and current data, the petrochemical industry prosperity index is expected to show a downward trend in March.
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