A flurry of short covering has boosted the Northwest European benzene price by around $40/mt, market sources said Friday morning.
The market ignored a fall in the Asian market and stable European naphtha market to make a series of upwards surges over the morning.
Trades for 1,000 metric tonne CIF ARA August barges were done at $1,243/mt, $1,250/mt, $1,260/mt and $1,270/mt (Summit buying) during the morning. This was followed by Dow selling a July barge at $1,270/mt.
By 11:00 BST (1000 GMT), August was seen at a bid/offer range of $1,260-1,270/mt.
The cause of the spike was a hot topic among market sources, with one trader calling the rise "crazy madness".
Some sources suggested that there could be production issues in the market, although no specific problems have been reported, and several other sources said that they did not see any production problems. One noted that there were "no fundamental issues" heard.
Total Petrochemicals has been buying benzene this week and is believed to be approaching a scheduled shutdown at their Gonfreville, France unit in the first half of August. Total sources would not comment.
Another explanation for the sharp rise in benzene Friday -- and over the week in general -- has been an increase in buyers looking to cover previous short positions.
Sources have said that the main buyers at present are trade rather than industry and that the buying is "just speculation" that the market is strengthening after a bearish period.
One industry source said: "The market is going from bearish to bullish and this concentrates the buying interest at one single point. There's been a lot of bearish people holding short positions and now the market is changing they have to come in to cover."
The view that the market had spiked on short covering strengthened as prices eased back as buyers stepped away around the lunch period. Sources reported that August bids had moved down to $1,240/mt, with offers falling to $1,255/mt.
