Geopolitics of crude oil and rising domestic demand sets Toluene prices in India on a bull run – 25 Jul 2014

Intensified geopolitical tension between Europe and Russia, along with falling stock inventories for crude oil in North America, has led to volatility in crude oil prices this week. Resultantly, the prices of Toluene, which is one of the most traded aromatics, has gained momentum in Indian and International markets. In India, strong cyclical demand for the solvent has lead to expectation that prices may strength in the future.  

On 23rd July, 2014, Brent Crude prices peaked at $108.03 per barrel and WTI reached $103.12 per barrel for the week, before declining to $107.07 and $102.07 per barrel , respectively, on the consecutive day.

 The MH17 flight incident in Ukraine has threatened to intensify  the crisis between the West and Russia. On these lines, the European Union is set to consider restricting Russia's access to capital markets and sensitive technology, according to international news publications. In addition to this geopolitical tension, the supply of crude oil at Oklahoma, also fell by 1.4 million barrels last week, according to the American Petroleum Institute, which lead to a hike in WTI prices this week.

Adding on this a prominent importer in India told the website, "The latest geopolitical tension between Russia and and Europe has yet again led to what is called a "fear factor" purchasing of Toluene, as there is a speculation that crude oil prices will be very volatile in the near future". Evidently, the benchmark price of toluene in South Korea has increased from the level of $1,165 per metric tonne FOB South Korea on 16th July, 2014 to highs of $ 1,203 pr metric tonne FOB South Korea on 23rd July, 2014, according to Indianpetrochem price database.

 The website gathers, during June, 2014 the average incoming cost (shipment from overseas) of Toluene onto Indian ports was Rs. 74-75 per kg, however, these prices have now touched levels of Rs. 78-79 per kg, sources say. At present, the bulk price of Toluene at Mumbai and Kandla is Rs. 78-79 per kg, buffeted by strong cyclical demand from paint industry.

A prominent importer informed the website, "The demand from the paint industry has gained pace this week, almost 4,000-5,000 metric tonne of Toluene has been sold from Kandla port itself and at present there are only 7,000-8,000 metric tonne of stocks at Kandla ".

 Most traders expect the prices to easily touch higher levels, on account of rising domestic demand and international benchmark prices.