LONDON (ICIS)--The European benzene spot market rose this week on the back of ongoing bullishness in the energy market, a few customers covering short term needs as well as a significant spike in the downstream styrene spot market, sources said on Friday.
Brent crude surpassed $71/bbl this week for the first time since 2014 and was trading above $70/tonne on Friday morning.
The crude oil rally of the past few months has been a mixture of OPEC-led output cuts, which began almost a year ago and are expected to last until the end of 2018, good demand, a drop in US crude inventories and more recently a weaker US dollar.
US crude inventories fell for a 10th consecutive week with latest data from the US Energy Information Administration (EIA) revealing a 1.1m bbl drop since last week, even if analysts were expecting a bigger decline.
At the start of the week, news emerged that Total shut the aromatics extraction and isomerisation units at its Port Arthur, Texas, refinery following a boiler shutdown that occurred on Monday, according to market sources.
It remains unclear for how long the unit will be shut down as there has been no official comment from the company’s side.
Following the news, the European benzene market turned firmer and trades were agreed at a higher level for January and also prompt February delivery compared to the week before.
Still, some traders thought that those deals were the result of short covering as a few customers were still looking for January material and less a reaction to the production issues in the US.
Availability in the domestic market was not thought as tight, but some sources felt that Europe should not be described as long either for the time being.
The upward push was short-lived, though, as values started to ease from mid-week onwards since Europe is just a few days away from the start of the widely-discussed turnaround season in the downstream styrene market.
From February until probably most part of the first half of the year, several European units will undergo planned maintenance shutdowns which will bring benzene consumption lower and, therefore, players are bearish when referring to the market’s outlook.
In the US, one styrene unit is already under planned maintenance, while the market is confronted with fresh production issues at the Cosmar complex, which is a joint venture between SABIC and Total.
Meanwhile, the European aromatics markets had to face fresh logistics issues in certain areas of the Rhine where shipping has been blocked, although other parts have already been released.
It feels, though, that the problems are more serious this time.
Market participants located in the wider Germany area expect the situation to get more difficult as the weather will be getting milder in the next couple of days, which will lead to even higher water levels because of the melting snow.
Traders pointed out that once these issues occur, the Amsterdam-Rotterdam-Antwerp (ARA) region might feel tighter for a while.
Meanwhile, February benzene contract price negotiations will be taking place next week and the strong euro against the US dollar is already one of the main points among the parties involved that could largely shape any possible outcome.
A numbers of European benzene players believe that soon numbers should be dropping below $900/tonne with the downward pressure mainly driven by lower demand from the styrene side due to the upcoming turnaround season.
Others, however, underlined that a counterargument to that could be the firmness of the crude oil market, where, despite expectations for a correction in prices, Brent remains close or even above $70/bbl.
Some analysts said that the crude oil market probably holds even more strength and it will not be a surprise if prices break the $80/bbl barrier by the end of the year.
Focus article by Vasiliki Parapouli
Image at top: OJO Images/REX/Shutterstock