Benzene-naphtha spread to further decrease

Benzene prices receded recently despite rising oil prices, particularly after the approval for Zhejiang Petroleum & Chemical to import additional crude oil. By the close on October 26, East China benzene spot prices decreased to around 7,750-7,830yuan/mt.

China's benzene supply-demand structure has gradually improved since September. The issue of crude oil import quota for ZPC is only a booster for the price fall. Benzene-naphtha spread is expected to narrow due to firm crude oil prices and ample supply.

Rebounding global oil consumption amid tight supply have prompted Wall Street banks to raise significantly their projections for oil prices in the short and medium term.

According to the incomplete statistics of benzene industry chain supply and demand balance, China domestic benzene output is expected to decrease by around 116kt in November-December due to maintenance, and output increment is estimated at 113kt brought by restarts and new startups. Benzene demand loss is estimated at 213kt due to downstream maintenances, while demand increment around 96kt amid downstream restarts/new startups. Overall benzene inventory is expected to increase. In addition, China domestic benzene prices stand the highest across the globe, the upward room for benzene price would see increasing resistance in anticipations of more imports.

In short term, benzene prices are expected to recede with ZPC ramping up operating rate. However, the market could also find supports on firmer oil prices. In general, benzene-naphtha spread is expected to narrow. The spread was around $174/mt on Oct 26.

News about Zhejiang Petroleum & Chemical-crude oil import quota

Rongsheng Petrochemical announces today (October 25, 2021) that the Ministry of Commerce has agreed Zhejiang Petroleum & Chemical Co., Ltd., or ZPC, (jointly invested by Rongsheng and Tongkun) to import 12 million tons of crude oil in 2021 for its Phase II refining and chemical complex. ZPC will ramp up operating rate of its three crude distillation units (CDU) and is expected to start the fourth CDU in November 2021, according to a source of ZPC. Market participants expect that the refined oil products of ZPC will flood into the market around mid-November. ZPC is also ramping up operating rate of its reformers.