Asia’s Benzene Plunges to Three-Month Low as Oil Rout Deepens
Asian benzene prices plunged to a three-month low on Thursday, extending a four-session decline as a sharp selloff in crude oil markets, weakening Chinese demand and expectations of improving regional supply intensified bearish sentiment.
The decline followed heavy losses across energy markets, with benchmark Brent crude heading for its steepest weekly drop since April 2020 as investors assessed prospects for an end to the months-long conflict in the Middle East.
Crude oil prices hovered near a two-month low on Thursday amid renewed diplomatic efforts to resolve the conflict, easing concerns over potential supply disruptions and unwinding geopolitical risk premiums that had supported energy and petrochemical markets in recent months. Front-month January Intercontinental Exchange Brent crude
futures plunged to $$93.06/bbl, below the key $100/bbl threshold.
Asian benzene recorded its largest single-day percentage decline of the week on Thursday, falling 5.25% from the previous session as the deterioration in upstream energy values triggered further selling pressure across regional aromatics markets.
The midpoint of the OPIS FOB Korea benzene assessment for December loading plunged 14.2% from $1,210.50 per metric ton FOB Korea on Oct. 16 to $1,038.50/mt FOB Korea on Nov. 5, marking its lowest level in three months.
The sharp correction reflected a reversal in market sentiment after weeks of elevated prices supported by tight regional supply, strong Chinese import demand and geopolitical uncertainty.
South Korea’s Supply Recovery, Closed US Arbitrage Add Pressure
Expectations of improving benzene availability in Northeast Asia have added to the bearish outlook, with several South Korean producers scheduled to complete maintenance turnarounds during November.
The anticipated restarts could restore additional spot volumes to the regional market in December, easing supply constraints that had supported Asian benzene prices throughout October.
Meanwhile, the closure of the Asia-to-U.S. benzene arbitrage window has further weakened regional market fundamentals, potentially reducing export opportunities for South Korean producers.
A sharp decline in U.S. benzene prices has eroded the price advantage previously available to Asian exporters, effectively closing arbitrage opportunities into both the US and European markets.
The price differential between South Korea and the US has narrowed to approximately $100/mt, reducing the economic incentive to ship Asian benzene cargoes across the Pacific once freight and other associated costs are considered.
The loss of these export outlets could leave additional benzene volumes within Asia, increasing competition among regional suppliers at a time when Chinese buying interest has weakened considerably.
China’s Benzene Prices Collapse as Sinopec Slashes List Price
In China, domestic benzene prices extended their steep decline amid heightened volatility in crude oil and commodity futures markets, while deteriorating downstream profitability and mounting sales pressure among derivative producers undermined physical demand.
The midpoint of the OPIS domestic benzene assessment plunged 17.3% week on week from 10,220 yuan/mt ex-tank on Oct. 29 to 8,450 yuan/mt ex-tank on Nov. 5, its lowest level in three months.
The latest assessment was equivalent to $1,096/mt CFR China on an import-parity basis.
The sharp correction coincided with successive reductions in Sinopec’s domestic benzene list price, reinforcing expectations of further weakness in the physical market.
Sinopec cut its list price by a cumulative 1,500 yuan/mt over four days, lowering it from 10,300 yuan/mt ex-warehouse to 8,800 yuan/mt ex-warehouse, its lowest level since Sept. 3.
The producer began reducing its list price on Oct. 16, bringing the total downward adjustment to 2,000 yuan/mt over the period.
The aggressive price reductions further dampened buying confidence, with major end-users and speculative traders remaining cautious amid expectations of additional price declines.
Domestic spot liquidity weakened as downstream producers grappled with deeply negative production margins in the preceding period, prompting operating rate reductions and curbing benzene procurement requirements.
Mounting sales pressure in derivative markets also discouraged additional feedstock purchases, exacerbating the decline in domestic benzene prices despite the recent tightness in commercial inventories.
Downstream Operating Rates Show Modest Recovery
Despite the deterioration in market sentiment, operating rates across several Chinese benzene derivative sectors showed signs of stabilization following the completion of major plant turnarounds and a modest recovery in production margins.
Styrene monomer operating rates stabilized in the low-60% range, while phenol and acetone plant utilization improved to the mid-70% range, according to Chemical Market Analytics by OPIS data.
Caprolactam operating rates remained steady in the low-70% range, while adipic acid plant utilization recovered to the low-70% range.
The modest improvement in downstream operating rates suggested some recovery in underlying benzene consumption, although the increase was insufficient to offset the broader deterioration in buying sentiment amid falling energy prices and expectations of additional supply.
The divergence between improving plant utilization and weakening spot demand highlighted the cautious procurement approach adopted by downstream producers, particularly as rapid feedstock price declines raised the risk of inventory-related losses.
Looking ahead, Asian benzene prices are expected to remain sensitive to crude oil movements, while the anticipated recovery in South Korean production and the closure of trans-Pacific arbitrage opportunities could further increase regional supply pressure.
In China, the pace of downstream demand recovery and the stabilization of domestic benzene prices will remain critical to restoring buying confidence following the sharp correction seen this week.
—Reporting by Hazel Kumari, hazel.kumari@dowjones.com; Editing by Mei-Hwen Wong, mei-hwen.wong@dowjones.com