OPEC+ Output Decision Casts Shadow Over Toluene Price Rally

Key Highlights

• Domestic Price Increase: Importer quotes rose to ₹63.50–64.00++/kg; trader offers at ₹63.75–64.00++/kg after a WTI spike.
• Pharma Demand vs. Broad Weakness: Pharmaceutical uptake improved mid-May, but bulk demand from packaging, paints, and coatings remains subdued.
• Tightening Refinery Margins: Naphtha-to-toluene spread narrowed to $150/MT (breakeven), and toluene-to-benzene spread is negative at –$12/MT.
• Bearish Outlook: OPEC+ plans to increase output; low downstream buying likely forces price correction soon.

Toluene Prices Rise with Crude Oil

• In the domestic market, importers raised Toluene prices by ₹0.5/kg, reflecting upward movement in upstream crude benchmarks.
• Bulk offers on 60-day credit terms from importers were reported at:
  A. ₹63.50++/kg ex-Kandla
  B. ₹64.00++/kg ex-Mumbai
• At the trader level, prices stood marginally higher on 60-day credit terms:
  A. ₹64.00++/kg ex-Mumbai
  B. ₹63.75++/kg ex-Kandla 
• The sudden increase in Toluene prices is largely attributed to the spike in WTI crude oil values observed yesterday.
• International Benchmarks – Benzene FOB Korea Futures
  a. 1H June 2025: $704/MT (↓ $6 WoW)
  b. 2H June 2025: $704/MT (↓ $6 WoW)
  c. 1H July 2025: $707/MT (↓ $6 WoW)
  d. 2H July 2025: $707/MT (↓ $6 WoW)

Pharma Segment Supports Demand; Others Lag

• Supply conditions remained steady due to regular vessel arrivals at Indian ports. However, liquidation slowed down after the first half of May.
• The pharmaceutical sector, a key downstream segment, witnessed improved offtake beginning mid-May. In contrast, overall bulk demand remained subdued compared to March levels. Market participants attributed this caution to speculative price rebounds driven by crude volatility.
• A trader commented, “Many buyers are adopting a wait-and-watch stance as they await clarity on crude direction, especially with OPEC+ set to increase output by 411,000 bpd from July.”
• Most end-users continue to show restraint, resulting in more spot-based purchases and limited forward inventory bookings.
• Demand from other key downstream applications—such as packaging, paints, coatings, and inks—remained weak, dampened by early monsoons and bearish sentiment across sectors.
• BTX Margin Outlook from a refinery economics perspective:
  1. Naphtha-to-Toluene Spread: Narrowed to $150/MT, touching breakeven threshold
  2. Toluene-to-Benzene Spread: Turned negative at -$12/MT, well below the $90/MT breakeven margin
• These shrinking margins are prompting calls for a correction in toluene prices to maintain the viability of refinery operations.
• “A downward price adjustment is necessary to restore margins,” a leading indentor remarked.
• With downstream demand weak and upstream crude supply poised to rise, short-term sentiment remains bearish.
• India’s monthly toluene demand is estimated at ~57,000 MT, with ~9,600 MT supplied domestically—primarily by RIL and BPCL. Imports meet the remaining ~45,000 MT of demand.

Chemicals Market News: Refinery Economics Under Pressure

• WTI Crude: Up 0.50% to $62.82/barrel
• Natural Gas: Up 0.40% to $3.70/MMBtu
• Feedstock Prices:
  a. FOB Singapore Naphtha: $556/MT
  b. FOB Korea Toluene: $694/MT
  c. FOB Korea Benzene: $706/MT

Expert Opinion: Bearish Short-Term Outlook Amid Oversupply

Expert anticipates a mixed short-term outlook for toluene amid bearish downstream demand and expected crude output growth from OPEC+. Buyers are advised to proceed cautiously and monitor feedstock trends for potential price corrections, particularly in naphtha and toluene, which may create favorable inventory opportunities later in June.