US toluene spot prices rise with crude oil

12 May 2017 23:32 Source:ICIS News

HOUSTON (ICIS)--US toluene spot prices closed the week higher thanks in part to an upturn in upstream crude oil. Liquidity returned to the market after sellers and buyers spent last week far apart on their bids and offers.

The weekly range for nitration-grade (n-grade) toluene was assessed at $2.13-2.20/gal FOB (free on board) on Friday, up by 8 cents/gal on the low end and down by 8 cents/gal on the high end, on the basis of three deals heard during the week. The Friday closing price for n-grade was assessed at $2.15-2.35/gal FOB, up by 10 cents/gal on the low end and 13 cents/gal on the high end, on the basis of bids and offers heard on Friday. The weekly range and the Friday close for commercial-grade (c-grade) toluene were assessed at an 8 cent/gal discount to n-grade toluene.

Toluene prices slumped at the beginning of the week on bearish sentiment in the crude oil market. But Wednesday's US Energy Information Administration (EIA) inventory data showed a substantial drawdown in US crude oil supplies, bringing a turnaround in spot crude and toluene prices. Also, there is a growing consensus among OPEC’s crude oil producers and various non-members to prolong the group’s agreement to lower output, and that helped stop crude's slide.

Meanwhile, the spread between toluene and benzene tightened by more than 45% week on week to 27.0 cents/gal from 49.5 cents/gal. According to trading sources, TDP operators generally look for a spread of at least 25-30 cents/gal between benzene and toluene to justify conversion unit economics.

Toluene is most commonly used as a chemical feedstock for on-purpose benzene and paraxylene (PX) production or as a gasoline component to boost octane. N-grade toluene is typically used for chemicals, and c-grade or off-spec n-grade is typically used for fuel blending, but strong demand in either grade can limit supply for both.

As an octane component in fuels, toluene is in its strongest demand season during the summer, when fuels must be less volatile. During the winter, fuel blenders can use less expensive octane boosters like butane. The summer fuels season runs through mid-September.

As a chemical feedstock, toluene is converted to other aromatics generally through the use of toluene disproportionation (TDP) units, which produce benzene and mixed xylenes (MX) or selective toluene disproportionation units (STDP), which produce benzene and a PX-rich stream of MX.

By Jeremy Pafford