The spot butane complex in Northwest Europe sank to fresh multi-month lows against naphtha Thursday, as gasoline blending demand remained weak and petrochemical buyers appeared well covered, defying what market sources said was thin supply.
Across the butane CIF coaster, FOB coaster, inland barge and large cargo markets, prices relative to naphtha levels inched into the low 90s% to high 80s% range, the lowest levels since late summer and early autumn.
Those declines continue the steady weakening across much of the butane complex this winter on the back of weak gasoline blending demand, due to the closed arbitrage from Europe to the US for gasoline cargoes.
"It is mega soft but the arbitrages [for gasoline to the US] are closed for blending so it is really hard to get much for the butane," a source said.
That has left much of the complex searching for a floor provided by petrochemical buyers, who use butane as an alternative feedstock to naphtha when prices are competitive. Market sources say butane is at levels where the product is attractive, but many petchems buyers are already well covered for the month and will only revisit the market in the new year.
That weak demand has undermined what market sources say is thin supply in Northwest Europe, partly due to delays of liftings from the Grangemouth, Scotland, terminal, after operator Ineos found a crack on the Forties crude pipeline that feeds into the complex. Overall delays are expected to last into January, according to market sources.
On Thursday, butane CIF coasters were assessed Wednesday at 92.5% relative to naphtha, the lowest level since August 15. On the butane coaster market, prices fell to 87% against naphtha, the lowest since August 3. On FOB butane barges, levels fell to 89.4% relative to naphtha, the lowest since July 7.
Barges inched to their lowest level since September 1 at 93.2% relative to naphtha.
