Tight MTBE market may continue to aid Europe toluene consumption boost

LONDON (ICIS)–European toluene has been supported so far this month by continued fuel blending demand with the expected seasonal drop yet to get underway, although demand from chemical markets such as toluene diisocyanate (TDI) remains weak.

Tight methyl tert-butyl ether (MTBE) supply has been a strong factor behind the early November lift in toluene demand.

MTBE is a more effective octane booster, and stronger blending margins than other products have boosted its attraction to blenders this year – but the lack of supply means some of this demand is shifting to toluene.

Demand for toluene has risen when there is less MTBE available in the previous years.

Other competing products like xylenes are in less demand for now.

“They take the toluene and leave the xylenes,” said one source.

The early November toluene demand spike has already eased slightly with improved Europe MTBE balances over the past week.

Ongoing demand for Europe’s MTBE from Latin America could still continue to boost toluene consumption towards 2020, as planned MTBE plant maintenance projects in the US are expected to end next year.

ROAD FUEL CONSUMPTION SEASONAL
Demand for toluene has fallen slightly for gasoline blending, after a small surge at the beginning of the month.

Gasoline additive demand is usually higher at the beginning of the month. But the increase went beyond seasonal patterns, with stronger demand than in October.

SUPPLY
Toluene supply has reduced but remains ample, despite additional consumption.

Premiums over Eurobob gasoline remain stable, as toluene consumption trumped poorer mixed xylenes (MX) demand.

MTBE tightness could go into 2020, depending on demand from Latin America. Strong demand, mainly from Mexico, is putting pressure on Europe stocks.

TOLUENE BOOST UNCERTAIN, BUT COULD CONTINUE
This could boost toluene demand in December but is not expected to impact fundamentals.

Wider demand from gasoline blenders tends to fall seasonally between September and December, and domestic MTBE supply could increase in the coming weeks depending on turnarounds.

Blending consumption as well as turnarounds may have tempered some length in the toluene market this month, but there has been no change in market fundamentals. 

The main chemical use of toluene is to make benzene and xylenes. The product is also used as a solvent that is present in paint thinners, nail polish remover, as well as in the manufacturing of nylon and plastic bottles.

Around 95% of MTBE is used as an octane booster. Effective octane boosters can include xylenes, toluene, ethanol, ETBE and MTBE.

Focus article by Clare Pennington