European toluene spot prices decrease following crude oil correction

03:34' PM - Monday, 12/02/2018

The week-long correction in the crude oil market has put Eurobob gasoline prices on a downtrend, pushing European toluene spot prices even to below $700/tonne, sources said on Friday.

Oil futures plunged following a build in US crude stocks, and failed to react to a short-lived outage on the North Sea Forties pipeline on 7 February.

The market made small gains once the news about Forties broke, which brought back memories of December’s prolonged outage that had the pipeline in force majeure for weeks.

An INEOS spokesman confirmed the issue on the pipeline had been identified, adding the company was aiming to resolve it in the same evening and activity to start up overnight.

Eventually, the pipeline reopened late on Wednesday without giving prices enough time to revert to a bullish trend.

Meanwhile, earlier this week, data from the American Petroleum Institute (API) reported an unexpected draw of 1.050m/bbl of US crude oil inventories for the week ending January 30, while analysts were confident for a build of 3.189m/bbl in crude oil inventories.

The API data also showed a draw in gasoline inventories of 227,000 barrels for the week ending January 30, despite analysts’ expectations for a 459,000-barrel build.

Nevertheless, fresh inventories data from the Energy Information Administration (EIA) showed a bearish weekly stock status, including a 1.9m-bbl increase in crude inventories, which triggered a further plunge in crude values.

In addition to that, OPEC member Iran on Thursday announced that it plans to boost production within the next four years by at least 700,000 bbl/day.

Based on the above, Eurobob gasoline values were hovering around $650/tonne on Monday, but fell close to $610/tonne on Thursday.

Toluene premiums over the Eurobob number were at $70-90/tonne.

This week was a bit different for European toluene players, who focused in the US market as the arbitrage window seems to have reopened, although there are volumes that are shipped there on a regular basis.

US spot toluene prices are on a high level due to short-term supply concerns as well as production issues discussed in the market.

European volumes are believed to already be heading there as gasoline blending demand sounds healthy, while there is a good pull of volumes for the selective toluene disproportionation (STDP) processes.

Depending on how long the flow to the US will continue, European players believe that the latest export activity could give some support to domestic prices, while the market might end up more balanced.

Still, if the crude oil price correction continues further, it remains to be seen whether the US exports alone will be enough to take European toluene spot prices higher.

On the demand side, there seems to be no particular change in volumes since the start of the year, although the distribution market is in a better shape.

Distribution players witnessed good order entry in January, as customers were restocking after the holiday season and expect February to be a decent month, although there will be a small impact as it is shorter in working days.

Distribution prices stood at around €600/tonne on a free carrier (FCA) basis.

Even though some producers were asking for €630/tonne, business could not be agreed on that level.- ICIS -

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