Synthetic rubber futures saw significant gains on March 6, as ongoing tensions in the Middle East sparked concerns over potential crude oil shortages and refinery output reductions, boosting the broader petrochemicals sector. At the time of writing, the benchmark synthetic rubber futures contract, BR2604, had risen over 4%.

**Key Driver 1: Disrupted Middle East Oil Shipments Raise Asian Refinery Supply Concerns, Strengthening BR Cost Support** Due to geopolitical tensions, oil and gas transportation from the Middle East has been disrupted, leading several Asian refineries to gradually lower operating rates. This is expected to reduce butadiene supply in Asia. Meanwhile, a sharp increase in European natural gas prices has further raised operational costs for European refineries, increasing the likelihood of reduced output or shutdowns of European butadiene facilities. This may lead to a decline in European butadiene exports. Consequently, China's domestic butadiene supply is expected to decrease, with net imports also likely to fall. Additionally, current port inventory levels for butadiene, while fluctuating at high levels in East China ports after the holiday, show limited accumulation, indicating reduced import shipments. The continued strength in butadiene prices has compressed profit margins for butadiene rubber production, worsening losses for producers. Widespread industry losses could lead to output cuts or shutdowns among butadiene rubber manufacturers, potentially causing butadiene rubber inventories to decline from high levels. Overall, expectations of raw material shortages are driving butadiene prices higher, strengthening cost support for BR.

**Market Outlook:** On the cost side, reduced operations at some Asian refineries are expected to lower domestic butadiene supply in China, while overseas butadiene supply may also decline. China's net butadiene imports are likely to decrease, and port inventories are expected to draw down, supporting butadiene prices in the short term. On the supply side, butadiene rubber inventories and operating rates remain high in the near term, but continued cost increases are exacerbating losses for producers. Expectations of expanded output reductions or shutdowns are growing, which may lead to inventory drawdowns for butadiene rubber. On the demand side, Chinese tire manufacturers are expected to continue front-loading exports to the EU in March, supporting tire production rates. Overall, short-term cost support for BR has strengthened, and demand remains supportive. Therefore, BR2604 is expected to trade firmly in the near term. Regarding strategy, due to recent high market volatility, holders of long futures positions should guard against the risk of a pullback after rallies and may consider profit-taking on strength or converting some long futures positions into long call options. Holders of short futures positions are advised to close positions and exit.

**Risk Warning:** Middle East oil shipments return to normal in the short term.