The spread between spot prices for benzene and naphtha in Europe has turned negative, reaching minus $2/metric ton, as feedstock naphtha values continue to increase amid healthy demand since September, according to the latest OPIS data.
The last time the benzene-naphtha spread turned negative was in November 2011 when it hit minus $1/metric ton, the data showed. Spot European benzene prices have been pulled lower since early August this year on the back of ample supply. Benzene is used in the manufacturing process for products including styrene, cumene, cyclohexane, and nitrobenzene.
The narrow spread in Europe indicates that demand for benzene from downstream sectors is weak due to seasonality and also the economic impact of COVID-19. However, the benzene spread to naphtha could turn around quickly should demand return. “Month-on-month benzene demand growth was rapid from April to September, but now seems to be stagnating,” says Simon Cleghorn, aromatics director consultant at IHS Markit. “The weak benzene-naphtha spread indicates that the market is oversupplied, and this is only likely to change to more normal levels once demand starts to pick up,” he says.
Benzene-naphtha spreads tightened at the end of March amid a sharp drop in oil prices, narrowing to $29.75/metric ton on 24 March. They recovered briefly mid-April to $160.50/metric ton, but have since moved downwards since early May, OPIS data showed. The spread was at $352/metric ton in January, amid stronger benzene prices arising from a reduction in supply.
“A low spread isn’t sustainable, but could last for some time, as long as we have an oversupply,” a market source says.
OPIS is an IHS Markit company.
By: Fahima Mathe
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