Europe toluene market slows down, Eurobob gasoline softens despite firmer crude

LONDON (ICIS)–The European toluene market has entered a more relaxed mode with rather slow activity and reduced demand as the Christmas holiday period is only a few days away, sources said on Thursday.

During the past couple of weeks, players have been finalising agreements for next year with no big changes in terms of availability, while slight optimism was evident for demand in 2018.

The market is anticipating BASF’s ramp up of production at its 300,000 tonnes toluene diisocyanate (TDI) plant in Ludwigshafen early next year, which could make a difference to toluene volumes and pricing as well.

Although initially this was expected to happen during the second quarter of the year, latest estimates indicate that the plant could run at full capacity as early as February 2018.

Until then, the toluene market will most likely remain quiet in January with fundamentals quite similar to the current month.

One of the only reasons that could lead to a different market direction in the short-term would be a strong jump in crude oil values but this does not seem possible looking at futures.

However, earlier this week an unplanned shutdown of the UK’s biggest North Sea oil pipeline, which carries around 450,000 bbl/day of crude from the North Sea to the Kinneil processing terminal in Scotland, continued to add support to crude oil prices.

The Forties supply line may remain shut for several weeks, coinciding with a general tightening of the oil markets after the new OPEC agreement.

Crude oil futures on were buoyant mid-week amid recent American Petroleum Institute (API) data indicating a draw in US crude inventories. US crude stocks fell by 7.4m bbl last week, according to the API, far from analysts’ expectations for 3.8m bbl decline.

A weaker US dollar also contributed to the bullish picture.

Still, contrary to a firmer crude oil market, the European gasoline market could be facinga further slump in export demand to the US as the country’s gasoline stocks have risen for the fifth consecutive week.

In the week to 8 December, US gasoline inventories increased by 5.6m barrels, once again exceeding the expectations of analysts, meaning that US gasoline stocks have ballooned by more than 8% in little over a month.

European toluene players expect that Eurobob values will ease further in the weeks to come.

Toluene premiums this week were still heard around $60-80/tonne.

Meanwhile, although activity on the export front is currently looking rather subdued, players feel that the arbitrage to the US will be one of the key points for next year, which could boost European toluene business further, as it happened last August when Hurricane Harvey hit the US Gulf Coast area.

In the distribution market, prices were heard at €585/tonne on a free carrier (FCA) basis this week, although official prices from some producers were as high as €615/tonne FCA, but these levels hardly attracted any buying interest.

Pictured: A Christmas market in Esslingen am Neckar, Germany
Source: Markus Lange/imageBROKER/REX/Shutterstock

Additional reporting by Lucy Raitano