The Northwest European benzene market is likely to remain supported in August despite the sharp fall in upstream markets over the last two days, sources said Friday.
Since trading at $1,322/mt for 1,000 mt CIF ARA August barges Tuesday, prices have dipped by a minimum of $52/mt due to a steep fall in crude and naphtha prices.
Sources said the first half August market was at a bid-offer range of $1,250-1,275/mt Friday morning, with any-August marginally lower at $1,240-1,270/mt. One trader said he felt that the August market would trade around the $1,260/mt level -- down $9/mt from Thursday's close -- but sources still said the market was well set to retain some strength.
The spread between benzene and European naphtha remained in the $330's, well above the break even point for production which sources consider to be around $250/mt.
Traders said fundamentals were currently supportive of benzene pricing, with August said by many in the market to be balanced to tight. One producer said: "The market still looks solid even with crude down, although the question of how tight the market is is debatable."
The same source said that for August, traders would look to squeeze those particpants with short positions, having accumulated length over the previous weeks.
This view was supported by a trader who said: "Trade has got product and will try and squeeze blood out of it." Whether this could be achieved appeared to depend on buyers stepping forward from industry. Many sources believe that industry's inventories are low, while traders have product in tank.
"With demand strong from cumene and styrene, you will see industry coming in sooner or later," one source said, and a producer added: "I think we'll see a clearer picture by mid-month. Buyers are holding off right now, especially with the current economic situation."
September was in backwardation of between $15-20/mt compared to August sources said, with the bid-offer range at $1,225-1,265/mt.
The outlook for September appeared less certain than August however, with market participants holding differing views.
One trader was bearish for September, saying that demand for product in the Amsterdam-Rotterdam-Antwerp region would be weakened by imports into the Mediterranean and styrene monomer shutdowns in Northern Europe.
Turkish producer Petkim is expected to return to the Med market in the second half of August following an extended shutdown at its Aliaga, Turkey plant while shipping reports also show a minimum of 15,000 mt of benzene from India headed to the Med in August.
The trader said this would make "Europe more comfortable for supply" in September.
A producer agreed, adding that downstream shutdowns would also push down benzene prices in the ARA region.
"Medium and long term there will be a hit on demand from the styrene shutdowns," the producer said, although he added: "But that is not so relevant for August if there is a short squeeze."
A second trader disputed this view, however, saying there was little evidence to support the view that prices would fall in September.
The trader said: "If we're going to get longer in September, where is the additional benzene going to come from? There are no imports coming in and crackers are still running on light feeds [which reduces the amount of feedstock pyrolisis gasoline produced]. There won't be more benzene. The only question is over demand."
