Europe toluene market remains firm amid crude oil ongoing strength

LONDON (ICIS)–Energy continues to be the driver of European toluene spot prices as Brent crude oil values surpassed $70/bbl this week, although overall fundamentals remain slow after the holiday season, players said on Friday.

At the end of December, the domestic toluene market was looking quite bullish, but took a softer turn following the Christmas break.

Chemical demand appeared to be subdued, while there was more activity coming out of the blending side.

For most of last year, chemicals were not the main driver of the European toluene market, although it did witness a slight difference in the last quarter of 2017.

Despite the slow start to the year, sources quoted that volumes were on a satisfactory level, and maybe better than last year, as customers restock as well as run a bit harder on the derivatives side.

Neither production nor consumption was facing any hiccups, while any arbitrage opportunities were scarce.

Imported volumes were said to be further improving the market’s availability, although players did not witness any firm offers.

At the start of the week, parts of the River Rhine had to close to shipping transportation as a result of surging water levels in Germany over the last weekend, according to a representative of the country’s waterway and shipping administration.

Chemicals producers in the region received warning late last week that high water levels may impede shipping, and the situation intensified over the weekend, reaching nearly 700cm in places.

The situation appeared to be improving from mid-week onwards.

The actual limitations in the waterways lasted only 3-4 days with only minor delays for barges during the weekend, sources confirmed.

On the energy side, this was another strong week for crude oil values with Brent breaking the $70/bbl barrier for the first time since December 2014.

Still, analysts doubt whether there is any more upward strength left after the recent rally.

The main drivers for oil prices have been: better-than-expected demand; last autumn’s decision by major OPEC group of oil-producing nations, as well as Russia, to extend production cuts, and geopolitical tensions around the globe.

Based on that, Eurobob gasoline prices maintained a level above $600/tonne, while toluene premiums over the Eurobob number were heard at $60-80/tonne.

Interest for mixed aromatics and blending components from China was still subdued, while the Chinese New Year celebrations starting early February are expected to slow down activity further.

In the distribution market, prices were heard at €600-610/tonne on a free carrier (FCA) basis.

OUTLOOK
European toluene players feel that, for the next couple of weeks, the market will still be driven by feedstock price developments, although they find it difficult to predict when the widely-discussed correction in the crude oil market will start.

Still, some estimates expect the crude oil market to remain robust throughout 2018 mainly driven by the OPEC-led output cuts.

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