Rising US spot toluene prices widen Europe-US arbitrage: data

New York — Surging US toluene prices have widened the arbitrage between the Europe and the US, with the spread estimated Feb. 11 at just under $52/mt on paper, S&P Global Platts data showed Feb. 12.

US spot toluene values have risen sharply during 2021 with prices gaining 43 cents since Jan. 2 to close Feb. 11 at 237 cents/gal FOB USG.

The increase in pricing has been driven in part by planned and unplanned outages in the US Gulf during Q1. Marathon was heard to be taking a six-week planned maintenance in mid-February while Valero shut its reformer at Corpus Christi due to a pipeline leak, a Texas Commission on Environmental Quality filing showed. Additionally, sources said that Shell was carrying out planned work on an FCC unit at Deer Park in January, restarting Feb. 8.

Market participants have said this has driven at least two producers to buy notable volumes for February and March, with a portion of that material being imported though confirmation and details were not immediately available.

Toluene has seen further support from continued strength in upstream reformate pricing as well as gains in RBOB. US reformate prices have gained in line with stronger crude and naphtha pricing in 2021 with barge reformate prices on a DAP basis closing Feb. 11 at 191.60 cents/gal. Additionally RBOB futures have risen nearly 25 cents since the beginning of the year with March futures last settled at 165.02 cents/gal. The RBOB market continued to show a healthy contango with April futures at a near-13 cents premium to March.

Demand from the chemical segment remains subdued as the uptick in toluene prices crimped conversion margins.

US STDP margins were estimated last at near $20/mt, according to Platts estimates, supported by continued strength in benzene and a $45 uptick in paraxylene during February. Sources anticipated that demand would firm from the gasoline segment over the next two months as refiners prepare for a seasonal increase in gasoline demand. Toluene's blend value continued to hover at a roughly 10 cents premium to reformate and was last estimated at near 200 cents/gal, Platts data showed.