US Gulf Coast isobutane's premium over normal butane set a new four-year high Tuesday at 20 cents, as market sources were mixed on the reason behind the price spike.
Non-LST isobutane, reflecting prices at the Enterprise terminal in Mont Belvieu, Texas, rose 1 cent to $1.1025/gal, a two-year high.
The isobutane premium has not been higher since reaching 21 cents on November 7, 2012.
Market sources were divided on the reason behind the 20-cent isobutane premium, one that averaged 1 cent in November 2014 and 2015. In comparison, isobutane averaged a 9.4-cent premium this past November.
Some industry sources said upcoming Tier 3 sulfur content regulations for gasoline may be increasing demand for alkylate, a low-sulfur, high-octane blendstock produced from isobutane.
Others have suggested that a Mont Belvieu isomerization unit may be down for maintenance based on the unusual isobutane premium and a lack of significant price spikes in alkylate or MTBE, both of which are made with isobutane.
"That unit has been down for two months on and off," a trader said.
An isomerization unit at Enterprise's Mont Belvieu complex went down for maintenance October 3-21, along with a de-isobutanizer, cogeneration unit, mercaptan oxidation unit and pentane stripper, according to a company filing with the Texas Commission on Environmental Quality.
Enterprise reported startup operations from October 28-November 13 in another filing with the state agency.
An Enterprise spokesman did not respond to multiple requests for comment Tuesday.
Within those maintenance and startup periods, isobutane registered double-digit premiums for the first time since early 2013, climbing as high as 17.25 cents on October 12 before sliding to 3.75 cents on November 1 and spiking again into double digits from November 3-9. From November 10-23, the premium fell as low as 4.25 cents before jumping to 13.5 on November 28 and has remained in double digits since.
Elsewhere in NGLs, December normal butane fell 2 cents to 90.25 cents/gal as January barrels were heard 6.25 cents lower.
Sources on Monday attributed the market's steep backwardation to winter gasoline blending demand, a tight butane market and trader positioning.
S&P Global Platts assessed heavier natural gasoline barrels just 2.25 cents above isobutane at $1.125/gal, down 2.5 cents. That spread averaged 40.75 cents in December 2014 and 35.1 cents the following year.
January non-Targa natural gasoline was assessed 2.25 cents higher, as sources said the market's contango was due to a selloff ahead of end-of-year taxes.
