US toluene supply tight on blending

OREANDA-NEWS. July 27, 2015. US toluene supply was short during the second quarter as seasonal demand for octane blending curbed the volumes of toluene extracted at refineries.

As US octane values rose sharply during the summer driving season, more reformate entered the gasoline pool. Gains in regrade caused toluene's conventional blend value in gasoline to eclipse spot prices in April. The blending premium continued to widen through the summer months.

In June toluene's blending value averaged 356?/USG, while spot prices only averaged 299?/USG during the same period.

Strong blending demand for toluene gradually lent support to spot pricing, but liquidity became thin as no material was available for sale. Strong US demand eventually led to a handful of toluene fixtures from Europe and Asia into the US Gulf coast. Few traders managed to take advantage of the wide arbitrage between the US and Europe amid a shortage of vessels.

Surging toluene demand also whittled away benzene inventories. Spot toluene prices edged to a premium over benzene in the first half of May and widened as high as 51?/USG 27 May. In June, toluene's premium over benzene averaged 27?/USG, making conversion economics at most units unworkable.

Toluene prices could drop in coming months as refiners switch to butane blending during the winter, and month 2 discussions for toluene pricing keep the blendstock at a slight backwardation.