The toluene barge average price for September was $2.9742 per gallon. The market moved down $0.0247 per gallon in October to $2.9495 per gallon. This downward trend continues in November with the average monthly barge price moving down another $0.2760 per gallon to $2.6735 per gallon through close of business on November 14th.
The xylene market, however, has taken a different path. The September average xylene barge price of $2.5820 per gallon was a remarkable $0.3922 per gallon discount below toluene. The October xylene market rebounded by $0.3922 per gallon to close at an average price of $2.9464 per gallon. Xylene barges are down $0.4964 per gallon in the first half of November with the market sitting at an average price of $2.4830 per gallon.
Toluene and xylene’s price relationship to gasoline has also changed significantly over the past 30 days. In mid-October, toluene was trading at $0.9000 per gallon over RBOB gasoline while, xylene was trading in the $1.02 – $1.05 gallon per range over RBOB. Over the course of November, we have seen those spreads narrow. Toluene and xylene are currently trading at $0.5600 and $0.4800 per gallon respectively over RBOB as of mid-month. It’s clear that the relative strength of T&X for gasoline blending is down about 50% over the past 30 days.
However, weakness in toluene does present an opportunity to make benzene and paraxylene. TDP and STDP operations have been curtailed in the US for several years now due to overproduction of paraxylene in China and due to the high value of toluene in the US gasoline market for octane purposes. Toluene conversion to benzene and xylene via TDP operations have not made economic sense nor has toluene conversion to benzene and paraxylene via STDP operations. Paraxylene units in the US operated at only 29.4% of capacity in Q3, 2024. With toluene prices coming down and benzene prices flat, TDP and STDP economics are positive on paper. It remains to be seen if US producers will increase rates on these units in late 2024.
Traders overshot gasoline demand this past summer with around 3 million barrels of imported toluene and xylene from South Korea in May and June. It took several months to blend off these imports. Looking ahead, the US is still structurally short octane blending components to blend off length in naphtha. The US will need some imports, but the arbitrage is currently closed from South Korea and Europe.
Toluene and xylene barge supplies are currently well balanced against demand. However, it would not take much to cause a run on T&X for octane usage as US gasoline inventories are 4% below the 5-year average for this time of year. Even worse, inventories are now at a 5-year low at 206.9 million barrels. We are not far away from a 10-year low of 201.7 million barrels in October 2014. It’s an interesting time since we are entering the typical inventory build season, but this season’s low inventory levels could have implications for the upcoming spring gasoline season.
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