Toluene prices have started to rise in US and Europe after witnessing a continuous drop since November backed by the tight supplies and surging demand from the downstream fuel and chemical industry.

Across the European region, the upstream Naphtha market has been experiencing tightness since last week amid supply restrictions. Delaying cargoes to Northwest Europe from Baltic states as a repercussion of the bad weather in the black sea and winter storms in Russia have been exerting pressure on the domestic traders. Consequently, healthy demand and unavailability of the material on spot basis in the European Toluene market have resulted in inflation in its pricing trend.

The USA Toluene market is now mimicking the European market sentiments as Toluene prices have started recovering after going through a downward trajectory consecutively for three months. An increase in Toluene prices is attributed to the spike in the upstream Benzene values and improvement in the offtakes from the downstream manufacturers. Moreover, lagging in production levels owing to hurricane season in last quarter and lower trading activities due to year-end dullness have led to product shortage in the region, consequently, influencing the prices of Toluene. Besides, the US Toluene market is also experiencing the effect of the International Maritime Organization global Sulphur cap that is turning out positive for Toluene's demand outlook.

Toluene is an aromatic hydrocarbon, derived as a byproduct in the production of gasoline by ethylene cracker or from petrochemical-based feedstock such as benzene in the presence of AlCl3. It is used in a wide range of industrial applications such as in the manufacturing of paints, glues, lacquers, dyes, stain removers, nail polish, and chemicals such as benzoic acid, trinitrotoluene, etc. It is also employed as a solvent and an octane booster or anti-knock fuel additive.

According to ChemAnalyst, Toluene prices are anticipated to showcase a significant climb in the near term. Firm demand, squeezed supplies, and a rise in the blending margins are expected to keep the Toluene prices strong in Europe and the USA in the coming quarter. Moreover, In the US, the aromatics market is going through the impact of EPA changes and the demand for Toluene and Xylenes has recovered to pre-pandemic levels which is also going to affect the market dynamics and prices of Toluene in the region.