Europe benzene spot price firmer despite weak fundamentals

LONDON (ICIS)–European benzene spot price sentiment remains bullish despite ongoing losses on crude and energy futures this week, sources said on Wednesday.

However, several players are sceptical about whether this upward trend is sustainable.

Brent oil futures fell below $100/bbl earlier this week, as concerns surrounding macroeconomic growth and oil demand weighed down on the market. The bearishness continued this morning, as disappointing economic data from China and the US saw energy numbers edge down further.

Meanwhile, European benzene spot levels have stayed comfortably above the $1,300/tonne (€988/tonne) CIF (cost, insurance, freight) ARA (Amsterdam-Rotterdam-Antwerp) level so far this week, with April trading as high as $1,320/tonne.

May has remained in contango, with deals done at $1,320-1,330/tonne while June has traded this week at $1,335/tonne.

The market opened this morning with April valued at $1,310-1,335/tonne, and May valued higher at $1,325-1,350/tonne.

Several players believe the current bullishness has been driven by trader speculation and cracker turnarounds, as derivative demand from key markets such as styrene remains soft, although for some sources this was not a comprehensive explanation.

“Crackers have not been running very hard anyway,” one trader said. “Even with cracker turnarounds, pygas [pyrolisis gasoline] is diverted and benzene is extracted elsewhere. We need to see demand coming back to support these higher numbers, really.”

Another trader said that an outage in Europe would explain the current robustness of benzene numbers as upstream values fell, but there is so far no news of any production problems with any aromatics unit.

Sources also noted that the US benzene market has seen strong gains, with April prices up as much as 4.5 cents/gal on Tuesday 16 April. However, this was seen as reverse logic by other players, which said US prices were simply following the upward trend in Europe.

Whether benzene numbers will stay above $1,300/tonne in the face of weak downstream sentiment is unclear. April styrene deals have been done this week as low as $1,535/tonne FOB (free on board) Rotterdam, bringing the spread with benzene below a break-even level.

“The benzene spread with naphtha is over $500/tonne now,” said one downstream source. “This does not seem sustainable.”

($1 = €0.76)