HOUSTON (ICIS)--US benzene demand looks to strengthen slightly into the second half of 2020 on rising derivative demand, although pricing is expected to generally follow energy values.
BENZENE MOVES WITH
US benzene values continue to rise with crude values as markets rebound from Q2 lows. Benzene current month spot prices closed at $1.465/gal the week of 24 July, above $1.355/gal a month ago.
Most market participants have pointed toward rising crude oil values as the main mover for US spot benzene prices in recent weeks. One market source stated the benzene market has been “energy driven”, with current market conditions de-emphasising other cost drivers.
WTI crude futures have been rangebound at $39-42/bbl since late June, plateauing since values quickly jumped from negative territory in late April.
While derivative demand remains mostly weak, benzene values will likely follow crude costs into the second half of the year.
However, demand will likely increase amid strengthening export demand for derivative styrene.
WINDOWS REOPEN SLOWLY
Trading windows between the US and other core benzene markets appear to be reopening slightly, per ICIS market analysis.
US spot benzene prices fell below Europe spot benzene by roughly $23/tonne just weeks after European values outpaced US values by $20/tonne at the beginning of the month, a shift that may spur imports into the US in the near term.
Meanwhile, US spot benzene values have risen above South Korean spot benzene for a fourth consecutive week as production resumes in parts of Asia since coronavirus lockdown measures hindered export volumes from the region during Q1 this year.
US benzene exports have lagged during the same period, particularly in Q2 as the US quarantine measures hampered production starting in late March.
Provided that slow global economic progress and weak demand persist, the US will remain a viable benzene importer moving forward.
Going into Q3, benzene supplies are sufficient to meet market demand that has been largely deteriorated since the heights of the coronavirus pandemic.
Benzene values will continue to move in tangent to crude prices in the near term as upstream costs have steadily moved higher in recent months on renewed optimism from a reopening economy and correcting crude oversupply.
Benzene spot prices continue to lag behind toluene spot prices, further discouraging toluene for benzene production via toluene disproportionation (TDP) units at refining facilities. Despite prices for both commodities bottoming out in April, toluene will continue to outpace benzene on narrowing supplies and increasing demand from spring and summer fuel blending activity.
Marathon Petroleum plans to finish scheduled maintenance on its Galveston Bay refinery in Texas City, Texas, by late July, ahead of its estimated 1 August completion target date. The facility has nameplate capacity of 340,000 tonnes/year of benzene, according to the ICIS Supply and Demand Database.
Benzene is used to produce a number of intermediates that are used to create polymers, solvents and detergents.
Major producers of US benzene include ExxonMobil, Marathon Petroleum, Shell, Flint Hills Resources, Chevron, CITGO, LyondellBasell, Valero and Total.
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Focus article by Adam Burkin
Thumbnail photo by Cultura/REX/Shutterstock