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NGLs Week

NGLs Week Newsletter  

NGLs Week is PetroChem Wire's comprehensive summary of price trends, upstream and downstream costs, operations news and supply/demand forecasts. The report contains everything you'll need to understand what's happening in the NGL markets.

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Isobutane-normal butane spread hits 46-month high of 18 cpg

HOUSTON, October 20, 2016 (PCW) -- On Oct 10, the spot isobtuane-normal butane premium came in at 18 cpg, according to PetroChem Wire prices, a high not seen since since November 2012, when the spread was at 20.25 cpg (see graph below).

NGLs Week has, on several occasions during the past few months, looked at the increasingly frequent blowouts of this differential. For the most part, the differential has always occurred toward the end of each month due to book-squaring dynamics.

In the last two to three months, the spread has blown out in the middle of the month instead, leading market players to suggest a short squeeze on the spread itself with trading volumes on that instrument looking particularly heavy.

Last week, the relationship was further exacerbated by Enterprise Product Partners – which owns 74% of US isomerization capacity – conducting maintenance on isomerization unit at Mont Belvieu. That maintenance was scheduled to end Oct 10, when the spread hit the 18 cpg high. EPD has begun the restart processes, according to a TCEQ filing, which are expected to continue through Nov 11. Since then the premium has come off slightly and was assessed Friday at 15.25 cpg.

From a fundamental standpoint, there has been a slight uptick in demand from specialty chemicals and isobutylene year-on-year that could sustain a larger-than-average premium between the two products (it has held an annual average of between parity and 3 cpg since 2013; for the year-to-date, the premium is averaging at 2 cpg).

Additionally, some sources have pointed to increased demand from alkylate production, which ultimately gets blended into gasoline. EIA data for motor gasoline blending components inputs (the agency does not break out individual blendstocks), however, shows a year-on-year lag with 1.058 million barrels for the week ending Oct 7, compared to the year-ago level of 1.118 million barrels. -- Samantha Hartke

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