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NWE toluene arbitrage to US reopens as regions' prices diverge

London — The Northwest European toluene arbitrage to the US Gulf Coast region has reopened this week as prices in the two regions moved in opposite directions.

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The May toluene price fell $11 Wednesday to $851/mt CIF ARA, while the FOB USG June price rose 2 cents/gal ($6.08/mt) to 297 cents/gal ($902.88/mt). This put the ARA-USG spread at $51.88/mt, sufficient to cover freight expenses of around $40/mt for 3,000-4,000 mt parcels.

The downside moves in Europe came on the back of weakening underlying Eurobob gasoline values. Meanwhile, toluene supplies remained tight in the US ahead of the summer driving season, which was expected to keep demand robust for octanes in the near future.

While some European producers had fixed trans-Atlantic exports for end-May/early-June loading from Northwest Europe, shipping sources said traders were exploring workability of toluene shipments from Leixoes, Portugal.

Domestic demand fundamentals in Europe remained weak as chemical users were still not making spot purchases. This also kept the toluene May-June structure in a slight contango of $3.50/mt.

An ongoing outage at a downstream TDI plant and negative toluene to benzene HDA conversion economics kept spot demand from the segments lackluster. Similarly, solvent distributors abstained from spot procurement of toluene amid high prices, remaining confined to contractual lifting only.

--Sam Hashmi, sam.hashmi@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com