Spot Northwest European benzene prices firmed Wednesday morning on the back of an overnight spike in the US Gulf Coast, which was offsetting gradual improvements in local supply, according to market sources.
The US spot benzene assessment reached a 16-month high Tuesday, rising 18 cents to $4.50/gal ($1,346/mt) FOB US Gulf Coast Tuesday for July. Sources attributed the higher benzene levels to short-covering by traders amid tight supply due to reduced production rates.
This spike supported European price levels, with sources reporting the first half-July market rising to a bid-offer range of $1,220-1,260/mt for 1,000 mt CIF ARA barges, compared with a closing range of $1,200-1,215/mt Tuesday.
Meanwhile, the any-July market moved up to $1,190-1,195/mt compared with $1,170-1,180/mt Tuesday night.
There were also reports of up to 4 trades done for the any-July market at $1,195/mt.
One industry source said: "The US has added a dimension to the market and is now driving it. European direction will now depend on what the US does. We'll rise on the back of a US increase."
A trader also felt that the firmness in the US would help Europe and said: "The US is high as there are issues on production there. Ethylene is falling fast so crackers are not running well and reformer margins are weak too." The firming of prices comes at a time when many in the market were beginning to see a gradual softening of European prices following strong prices throughout the latter part of May and June.
The European spike -- which peaked at an assessed price level of $1,368.50 June 11 -- was also caused by supply issues leading to prompt physical tightness in the ARA market.
Sources saw supply balances starting to gradually improve, although the prompt market was still seen as tight, reflected by reports of June trade heard done at $1,250/mt and $1,260/mt Wednesday.
One source said: "The backwardation in Europe is coming in and that shows that the market is still tight, but not as tight as it was. The system is starting to sort itself out now. The prompt squeeze has had its main point of impact now and the market is finding its way forward with what is available."
Part of the reason for recent tightness in the ARA zone were production issues at units run by Dow, Total and Exxon Mobil and according to sources these units were expected to re-start this week.
In addition, imports were expected to land in ARA during June and July helping to ease supply worries.
A trader saw a gradual improvement of local supply and said: "At present there is so little around, but the balances will improve with the re-starts and the imports should also ease things. They've brought some relief to the Med which is now more balanced than ARA."
