Toluene Market Faces Slowdown in the USA Amidst Crude Oil Price Volatility and Weak Demand

Texas, USA: The Toluene market in the USA has demonstrated a slowdown in the last few weeks amid weakness observed in the rising crude oil prices. The prices of Toluene have been declining week-on-week as the cost pressure eased from the feedstock Naphtha, whereas, on the demand side, consumer inquiries for Toluene from the downstream industries have remained sluggish.

The prices of Toluene soared throughout August amid the voluntary production cut announcement by Saudi Arabia and Russia, amidst which worries regarding global supply shortage arose. However, the rising crude oil prices concerned analysts about the demand conditions as the consumers were unwilling to purchase Toluene at higher prices.

Additionally, the demand for Toluene in the downstream paints and coatings industries has remained weak as the purchase orders were lagging. On the other hand, the demand from the gasoline market was also poor, as indicated by the EIA reports.

The market's closely watched index of gasoline use in the United States fell to its lowest level for this time of year in a quarter-century. It indicates a drop of 1 million barrels per day since the summer peak. The worldwide benchmark, New York-traded futures, fell 6.9%, one of several factors driving oil's worst one-day drop in a year.

After reaching year highs last week, crude oil prices have reversed direction. Front-month West Texas Intermediate oil futures, the US pricing standard, sank 5.6% to close slightly above $84 per barrel. The drop was the fourth in five sessions and the lowest close since late August, whereas WTI is down 10% after reaching a 13-month high of $93.68 per barrel.

Oil sank more than $3 per barrel in the first week of October 2023 as macroeconomic headwinds overshadowed Saudi Arabia and Russia's vows to extend crude supply curbs through the end of 2023. OPEC Joint Ministerial Monitoring Committee (JMMC) online meeting maintained the group's output policy unchanged.

However, Toluene's price has slowed, with Brent futures falling to near $90 on signals that the price increase is pushing the US Federal Reserve to maintain interest rates higher for longer. As a result, investors have become more cautious in their investments.

According to the ChemAnalyst database, the Toluene market is presumed to exhibit improvement in the upcoming months as the cost of upstream crude oil is anticipated to increase. Furthermore, the demand conditions might also improve as the economic conditions revamp and positively support the Toluene market.