Spot prices in the Northwest Europe butane market are diverging as buying interest from gasoline blenders is focusing on barges and moving away from larger CIF coasters, market sources say.
Prices between the two channels of pressurized supply open to blender buyers began to move apart throughout this week, with ARA barges on a FOB basis assessed steady at around 99% relative to naphtha on a FOB basis, and at about 102% on a CIF basis, being supported by sustained demand.
Prices for CIF coasters were assessed at 96% versus naphtha Thursday, having started the trading week at 99%, as blending demand there softened.
Butane is often the high-RVP octane-boosting component of choice for winter-grade gasoline, therefore demand for the gas usually ramps up after the switch from summer-grade to winter-grade gasoline around October 1.
Market participants say gasoline blenders currently prefer 1,000 mt barges because they deliver smaller amounts -- around half of what a coaster what would typically deliver -- on more specific dates, on a more prompt basis, and with less risk.
This convenience commands a higher price, sources said.
"There is demand for barges perhaps, but [not] for coasters," one source said.
Another source said: "I suspect that probably these barges are being bought by gasoline blenders, that are buying a little [at a time]." Coasters that are larger parcel sizes are less secure on dates."
With little trading on CIF coasters, offers are currently above parity, driving away interest.
"We still see both mixed and normal butane being offered at around 103%-105% CIF, at those levels it makes more sense for buyers to look for barges at high 90s instead," they said.
