Lofty US benzene values driven by tight supply, renewed demand

06 January 2010 17:50  [Source: ICIS news]

HOUSTON (ICIS news)--US benzene prices are at their highest level in more than a year as buyers look to restock material after a fourth quarter dominated by poor margins, buyers and sellers said on Wednesday.

Spot benzene recently traded between $3.75-3.79/gal ($1,125-1,140/tonne, €788-798/tonne) FOB (free on board) US Gulf (USG), compared with week-earlier levels near the January contract settlement of $3.55/gal, sources said.

The highest spot prices since late 2008 were a consequence of short benzene supply in the US Gulf region, owing to poor refining and conversion economics during fourth-quarter 2009, a producer said.

“Our system is on the edge... we are essentially operating hand-to-mouth at the moment,” a Gulf coast producer said.

Buyers said arbitrage to Europe in December also helped tighten supply in the US.

The current price picture started on the back of production outages in Europe, the producer said.

But as benzene consumers seek to rebuild inventories at the start of the calendar year, physical material has been tight, helping send prices higher.

Assuming no further outages and a timely return of downed capacity in Europe, the producer expected supply would begin catching up in late January, but warned that high prices would likely persist well into first-quarter 2010.

A benzene consumer agreed, citing February’s backwardation of only 2-3 cents/gal and saying buyers who did not negotiate benzene at the contract level would be hard-pressed to protect margins in January.

Major US benzene producers include BP Chemical, ExxonMobil, Flint Hills Resources, LyondellBasell, Shell, Sunoco and Total.

($1 = €0.70)

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By: Landon Feller
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