Europe toluene uncertain on market volatility

06 March 2008 18:55  [Source: ICIS news]

BRUSSELS (ICIS news)--Players in the European toluene market are unsure how the arrival of the much vaunted "driving season" in the US will affect spot values or general liquidity, traders said on the sidelines of the European Petrochemical Luncheon on Thursday.

"At the moment we see toluene demand as coming principally from gasoline blenders," a trader source said. "Demand at the pump in the US is down, and there are a lot of different views on how the market will go next month [in April]."

Economic downturn in the US and the current weakness of the US dollar against the euro, which hit a new low on Wednesday, and mandatory use of ethanol in blending in the US were all depressive factors on potential demand, the trader said.

"Although the market is in a strong contango on paper, no-one is really forward buying at the moment as they are unsure of how things will go."

Players said that toluene has traditionally become a more liquid and stronger market from March onwards, as the "driving season" in the US, which begins in May, sees an upturn in demand for gasoline blending components, with toluene amongst them, from the world’s largest energy consumer.

Another trade source said that players had been storing material in preparation for an upturn in demand in the US, leaving storage in Europe close to full.

With many players in Europe seeing the current market as undervalued on the basis of current record high energy complex values, the source said that there was the danger of price erosion into March and April rather than the explosion in demand and values that many players expected.

For more on toluene visit ICIS chemical intelligence

 

By: Peter Salisbury
+44 20 8652 3214

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