US May benzene expected lower

HOUSTON (ICIS)–The US May contract price for benzene is expected to settle lower this week, but is not expected to return to the level of record lows earlier in the year, sources said on Thursday.

The April contract had settled at a sharp 41 cents/gal increase over March, which had been the lowest contract value since April 2009.

High levels of US benzene imports had pushed down values prior to the March contract settlement. In addition to higher overall import levels, there had been a sharp increase in volumes from South Korea, an important source of US benzene imports which is watched closely by market participants and can affect sentiment in the US market.

The sharp increase for the April contract settlement was due in part to significantly lower imports heard inbound from South Korea amid still-strong benzene consumption levels which had prompted market concern over shortages. While import levels remain at similarly low levels ahead of the May settlement, supply has not been short amid lower demand and lower consumption.

Benzene is well supplied currently, but may become tight in June, a source said.

Downstream styrene, still tight from earlier outages, was running strong prior to the April settlement on high demand for US styrene exports into the Asian market.

Styrene prices had been rising steadily on that demand, but turned downward just prior to the April settlement as that export demand began to ease. During early April, styrene prices continued falling, eroding some support for benzene values and only last week began climbing again on interest from Europe for US exports.

The styrene sector consumes just over half of US benzene and is the strongest downstream influence on benzene values.

Also important is cumene, which consumes about 25% of US benzene and is most often used to make phenol/acetone. Ahead of the April sentiment, benzene demand for the cumene sector was good. However, turnarounds in both cumene and phenol which began earlier in April slightly lowered benzene consumption rates.

Upstream, benzene values are receiving more support from crude oil futures which have gained about $6/bbl since the April settlement. Although the spread between spot benzene and WTI crude oil futures has narrowed slightly compared to a month ago.

Benzene spot prices are stronger this week than in early April, amid the higher upstream values and renewed interest in US styrene exports. However, spot values remain below the April contract settlement which is prompting expectations of a lower settlement for May.

Contract prices are heavily influenced by spot prices prior to settlements. This week deals have been heard in a range of $2.07-2.10/gal DDP (delivered, duty paid), compared to $2.14-2.18/gal DDP ahead of the April settlement.

Expectations for May contract prices from market participants range $2.08-2.09/gal.

Benzene contract prices are typically settled on the last day of the prior month, with the May contract expected to be settled on Friday.

Major US benzene producers include ExxonMobil, Flint Hills Resources, LyondellBasell, Marathon Petroleum, Shell and Phillips 66.

Focus article by Jessie Waldheim

(INSET IMAGE: RESO/REX/Shutterstock)