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YEAR IN REVIEW: Butane, isobutane prices rise during 2017 on crude, exports

HOUSTON, December 26, 2017 (PCW) -- Spot butane prices are closing 2017 up 8.75 cpg, or 9.3%, from the beginning of the year on rising export levels and recovering crude. Isobutane rose 5 cpg (5%) as weaker fundamentals blunted the impact of stronger crude. On average, both butanes are exhibiting price strength from year-ago prices. Butane is up about 26.3 cpg (40.2%) and isobutane has risen 22.3 cpg (32.7%) on average compared to 2016.

Butane’s strength can largely be attributed to rising export levels. Exports hit an all-time high of 5.588 million barrels (180,258 b/d) in Mar. While gasoline blending remains butane’s largest source of demand, exports are becoming a larger part of butane’s demand pie. Last year, butane exports made up about 13% of overall demand; so far this year, it stands around 17%.  Isobutane, on the other hand, enjoyed less supportive fundamentals during the year. About 80-85% of isobutane demand is from the production of alkylate, which is used as an octane booster in gasoline.

Alkylate prices have fallen 7.4%, or 14.3 cpg, since 2015, due to softer gasoline prices and a preference for the higher-performing reformate as a blendstock for cheap naphtha. Absent a major isomerization unit outage, which tightens supply, isobutane has also held a persistent discount to normal butane for much of the year – a sea change from its premium relationship in years past.

Going forward, while butane continues to exhibit its seasonal strength in the winter season and weakness in the summer driving period, what could prove supportive in those typically lower-demand months are exports. Should cargoes remain at their currently elevated levels, butane could well find a strong price floor in summer. -- Samantha Hartke

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