Introduction: Between April 2 and April 7, Brent crude surged to $109 per barrel, marking a significant increase of 7.87% compared to April 1. The sustained high crude oil prices over multiple days bolstered the sentiment of major domestic enterprises. Concurrently, domestic ethylene units have indeed reduced production in April, leading to tight supply of domestic pyrolysis C5 and driving up its price. As of April 7, the price of pyrolysis C5 in East China has risen to 7,900 yuan per ton, an increase of 8.2% compared to April 2.

On April 2, the United States indicated it would continue military actions against Iran, heightening supply risk concerns and pushing international oil prices higher. By April 7, market worries escalated over potential U.S. military escalation against Iran, fueling significant apprehension. The market is closely monitoring whether large-scale military conflict will erupt in the Middle East. With crude oil trading at high levels, domestic major enterprises, buoyed by this sentiment, significantly raised pyrolysis C5 prices in line with the crude oil rally.

On April 7, domestic pyrolysis C5 prices saw a substantial increase, with major enterprises in both East and South China adjusting prices to 7,900 yuan per ton. However, as Middle East tensions subsequently moved back into negotiations the following day, crude oil closed lower, leading these enterprises to reduce prices by 200 yuan per ton to 7,700 yuan per ton.

From a supply perspective, since the escalation of Middle East tensions in late February and the closure of the Strait of Hormuz, domestic ethylene units have continuously operated at reduced capacity. This week, industrial pyrolysis C5 production remained largely flat compared to the previous week. However, production during the week of April 2 decreased by 3,500 tons, down 5.1% week-on-week. This marks the fourth consecutive week of decline, with cumulative pyrolysis C5 production falling by 20.6% compared to the week of February 26.

According to ChemPriceHub data, there are 34 ethylene cracking units producing pyrolysis C5 as a by-product. Among these, 22 enterprises have reduced ethylene output, halted production, or increased pyrolysis C5 recycling, leading to a decline in pyrolysis C5 production—four more enterprises than the previous week. Currently, 12 enterprises have not reduced pyrolysis C5 production, primarily located in Northeast and Northwest China, with only two showing slight output growth.

Therefore, production in April is estimated to be around 252,000 tons, a decrease of 56,000 tons or 18.2% compared to March, and a drop of 86,000 tons or 25.4% compared to January. Based on this assessment, industry sentiment regarding supply during the week of April 2 was generally pessimistic.

Since the Middle East risks intensified in late February, only Sinopec Shanghai's small separation unit with an annual capacity of 65,000 tons has been shut down since late March. Other separation units, while reducing output, have not halted operations. Major downstream processors continue to have demand for feedstock. Consequently, the supply-demand imbalance is relatively pronounced, serving as a primary driver for the price increase.

On April 8, the U.S. and Iran reached a two-week provisional ceasefire agreement, abruptly easing geopolitical tensions and causing international oil prices to fall. NYMEX crude oil futures for May delivery dropped by $18.54 per barrel to $94.41, a decrease of 16.41% month-on-month. ICE Brent crude futures for June delivery fell by $14.52 per barrel to $94.75, down 13.29% month-on-month. Although the Strait of Hormuz remains closed, signals of easing tensions in the Middle East have begun to emerge. The previous price support relied on two main factors: crude oil sentiment and actual supply-demand dynamics, which together drove prices to high levels. The current shift in sentiment may lead to some correction of overheated price bubbles. However, expectations of reduced domestic pyrolysis C5 supply in April remain largely valid, meaning support from supply-demand fundamentals persists. Currently, some crude separation and road marking resin enterprises are considering shutdowns, which could impact supply-demand dynamics in the later period. Meanwhile, the timing of the Strait of Hormuz reopening is a critical factor determining whether pyrolysis C5 supply can recover in May. If reopening is delayed, some individual enterprises may further reduce output or halt production due to feedstock shortages (affecting only scattered enterprises, not widespread). If reopening occurs soon, supply in May is highly likely to increase, warranting cautious observation.