Brent Falls Below 100 After the US Midterms. What It Means for Polyester Fabric Quotes

What moved between 30 October and 4 November

Brent crude futures, the oil price quoted in the news, closed October up about 13.6 percent for the month. The January contract settled near 113.43 dollars a barrel on Friday 30 October. On Monday 2 November it fell about 7.6 percent, to near 104.77, after Washington and Tehran both signalled they were open to talks. CNBC reported a further fall on Tuesday 3 November, to a settlement of 103.60, on hopes of a diplomatic settlement, with Qatar mediating.

On Wednesday 4 November the January contract settled at 94.62, down about 8.7 percent on the day, as markets read the Democratic gains in the US midterm elections as raising pressure on Washington to end the conflict with Iran. It was trading near 94 in Asia on the morning of 5 November. That is a fall of roughly sixteen percent in three sessions, and it takes Brent futures below the late-September low of about 98 that this site reported at the time.

In our post of 26 October we wrote that the case for a discount on polyester-rich cloth had gone. That was accurate on the market of that week, and its headline is no longer a fair description of the oil price, which is why this is a new post rather than another dated line on the old one.

The physical barrel fell too

All autumn we have watched two oil prices: the futures contract in the news and the physical North Sea barrel that refiners and chemical makers actually buy, which the US Energy Information Administration publishes daily. In October the physical barrel ran well above the headline, and we explained why that mattered for polyester costs.

The EIA release of 4 November shows the physical price at 120.15 dollars on 30 October, 107.39 on 2 November and 107.03 on 3 November, down from 128.30 on 23 October. On 3 November that left the physical barrel about three and a half dollars above the futures settlement, against more than eleven dollars on 23 October. So this time the gap closed from the top: the barrel chemical makers buy got cheaper, not just the number in the news. The EIA series for 4 November is not yet published.

Why this is not yet a settled direction

The fall rests on expectations, not on any change at sea. CNBC reported that Iran's foreign ministry said Tehran would not accept diplomacy based on coercion, that it was unclear where talks stood, and that at least four ship attacks had been reported in and around the Strait of Hormuz since the start of November. A price driven down by a hope can be driven back up by a headline, and crude has already reversed twice this autumn: down in late September, up again through October.

So read this as a large move in the right direction for a polyester buyer, not as the end of the high-input-cost period. The test is whether Brent holds below 100 for a few weeks, and whether the physical series confirms it in the EIA releases that follow.

How it reaches a polyester or poly-viscose quote

Cost travels down the chain with a lag at every stage. Crude sets the direction for paraxylene, PTA and MEG; those set polyester fiber and filament; spinners then work through yarn they already hold before buying at the new price. Weaving and processing come after that. A fall in crude this week shows up in yarn offers over the following weeks, not on the day.

This time yarn is already weak. Trade reports through late October and early November have described Indian polyester-viscose yarn as soft on thin buying, with a 4 November report headlined on polyester-viscose yarn markets weakening amid sluggish demand, and polyester filament reported on 2 November as losing its cost push. In October that softness was running against rising crude. Now crude and demand point the same way, which is what makes an easing in polyester yarn offers likely rather than possible.

Viscose is the exception. It is made from wood pulp, not oil, so the viscose share of a poly-viscose blend does not move with crude. A 65/35 poly-viscose suiting or shirting will ease less than a 100 percent polyester cloth, and a viscose-rich blend hardly at all on this news.

What we would do as a buyer

If you hold a quote on polyester-rich cloth issued in the second half of October, when crude was at its highest, it is reasonable to ask for it to be reviewed at your next order, and to expect the answer to depend on when the mill's yarn was bought. A mill weaving from yarn bought at October prices will not be able to pass on a fall it has not yet had.

Do not hold a programme back waiting for crude to fall further. Three sessions of decline on political news is not a trend a delivery date should depend on, and the same autumn has shown how fast it can reverse. Running short on a uniform programme usually costs more than a few percent on cloth.

Keep quote validity short in both directions. A short validity with a firm price lets you take the benefit if the fall holds, without the mill padding a long validity against the risk that it does not.

None of this changes a duty rate, an origin rule or the freight rate on your lane. For the cost of a specific cloth against current yarn, Request Catalog and tell us the blend and quantity.