Geopolitical conflicts dominate cost-side volatility, with toluene trading at elevated levels amid downward pressure.

Lead-in: Middle East geopolitical tensions continue to dominate energy and aromatics markets, with navigation through the Strait of Hormuz and progress in US-Iran negotiations serving as core variables. International crude oil prices have maintained high-level, wide-range fluctuations, driving up costs across naphtha and the entire aromatics supply chain. Toluene briefly surged to its third-quarter peak due to cost-side support; however, insufficient follow-through from downstream gasoline blending, disproportionation, and chemical solvent demand has resulted in clear resistance to high raw material prices, limiting further gains. The market exhibits a divergent pattern characterized by "strong cost-driven support but weak demand absorption."

I. International Crude Oil Price Comparison

Table 1: International Crude Oil and Related Product USD Price Comparison (USD/barrel)

Data Source: Chempricehub

In October, international crude oil generally maintained high-level, wide-range fluctuation trends, with intraday volatility significantly increasing due to geopolitical news disturbances. Bullish and bearish factors competed against each other, with geopolitical risk premiums and expectations of supply recovery repeatedly pulling the price center up and down. These fluctuations in crude oil prices directly impacted the cost side for domestic petrochemical products such as toluene.

Table 2: International Aromatics Product Price Comparison (USD/ton)

Data Source: Chempricehub

During the National Day holiday, international crude oil retreated from highs under the dual pressure of easing Middle East geopolitical conflicts and the G7 plan to release strategic reserves, yet it maintained high-level oscillations without breaking cost support. The Asian aromatics sector showed a divergent landscape. In the domestic market, trading activity was sluggish and liquidity was constrained as market participants exited during the holiday. In the USD-denominated market, tight toluene supply supported stronger prices, while rising freight rates to South Asia led to expectations of widening spreads for Indian CFR toluene. Solvent demand in Southeast Asia remained weak, but seller offers held firm. Some producers indicated that if the spread between aromatics and feedstocks became insufficient, they might consider shutting down BTX units.

II. Shandong Toluene and Related Product Price Comparison

Table 3: Shandong Gasoline and Aromatics Product Price Comparison (CNY/ton)

Data Source: Chempricehub

Specifically, spot prices for Shandong gasoline and aromatics declined slightly. Average sales-to-production ratios for gasoline were around 70%, while refinery sales-to-production ratios for toluene were below 39%, indicating an imbalance. However, pre-holiday inventory clearance was smooth, and most refineries had already allocated sales through October 3-4. Actual inventories were significantly better than implied by sales data. Combined with still-tight feedstock supply at refineries and very limited willingness to proactively cut prices, the market exhibited a typical "high price, low volume" state rather than true oversupply. Supply-side contraction intensified: Xin Chemical’s unit experienced unplanned shutdowns, while Tangshan Dimu increased demand after restarting operations, adding further strain to an already tight supply environment. On the first day back from the holiday, related aromatics futures hit the daily limit-up, consolidating positive sentiment and pushing toluene prices higher accordingly.

Table 4: Shandong Refinery Toluene Product Price Comparison (CNY/ton)

Data Source: Chempricehub

The benzene production and nitration industries in the Shandong region demonstrated strong tolerance for toluene premiums and continued to chase prices upward. Toluene auction transactions at refineries touched the 9,000 CNY/ton threshold. Xinyue Chemical has restarted feeding materials into its units, with product output expected within the week. However, Yulong Petrochemical’s shipment volumes remain limited, keeping regional toluene supply tight.

III. Market Outlook

In the short term, the toluene market is expected to maintain high-level oscillations following crude oil trends, exhibiting characteristics of "support at the bottom and resistance on the upside." If substantial progress is made in US-Iran negotiations and navigation through the Strait of Hormuz continues to recover, geopolitical premiums on oil will fade rapidly, causing toluene to retrace earlier gains. Conversely, if conflicts escalate again and push oil prices higher, toluene gains will likely remain significantly weaker than crude oil due to constraints on downstream absorption capacity.

In the medium term, as previously shut-down units resume production, the tight supply situation is expected to ease. Coupled with the fading benefits of the traditional "Golden September, Silver October" peak season and marginal weakening of demand for gasoline blending and disproportionation, there is downward pressure on the central tendency of toluene prices. However, low port inventories and refineries' willingness to hold prices firm will still provide some constraint on the extent of any correction.