US benzene hits 18-month high on tight supply

US benzene (BZ) this week reached an 18-month high on tight prompt supply, shipping delays and steady demand.

US BZ increased on Tuesday by 1.5¢/USG to 427.5¢/USG, the highest Argus assessment since 29 July 2022.

A heavy US refinery turnaround season in the current-quarter reduced US Gulf coast refining rates to 80.6pc last week, according to the Energy Information Administration. Refinery maintenance reduces reformer operating rates, yielding less derivative gasoline and aromatics, such as benzene.

Benzene from reformate comprised an estimated 70pc of US benzene production last year — up from 66.5pc in 2022 — so reduced refinery rates have meant even less BZ availability in the snug domestic barge market and more reliance on imports.

But logistics constraints, including low water levels at the Panama Canal and ongoing Red Sea vessel attacks, have delayed BZ import arrivals from Asia.

Transpacific shipping costs for a 40,000 metric tonne (t) midrange vessel have climbed to $120/t, up from $80/t a year ago, as transit times have lengthened from 35 days to 55-60 days. Transatlantic transit shipping costs have nearly doubled over the past year from $32/t to $60/t for a 10,000t cargo.

Higher freight costs and longer transit times have prompted US traders to bid up BZ to attract imports. Additionally, delays in imports arriving have led to some short covering efforts until volume does arrive, further supporting prices.

Benzene inventories ended 2023 at low levels, estimated by Argus at just 16 days of rateable consumption, compared to previous year-end levels above 20 days of consumption.

A revival of C6 exports — including BZ derivatives styrene monomer and cyclohexane — as well as forward demand for blendstocks ethylbenzene and cumene, has also supported a 33pc rebound in BZ prices since 2 January, when BZ started the year assessed at 322¢/USG, according to Argus data.

The BZ-to-crude ratio, a metric for valuing derivative US Gulf coast BZ relative to upstream feedstock WTI crude, reached an 18-month high on 12 February at 2.33, when BZ hit 426¢/USG and March WTI crude futures settled at $76.92/bl. The BZ-to-crude ratio has averaged below 1.9 over the past five years. In a balanced US benzene market, spot benzene generally averages 1.95 times the value of front-month WTI futures.

By Nicole Johnson

US BZ spot and BZ-WTI ratio ¢/USG