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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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Spot butane, isobutane enter gasoline blend season at four-year highs

HOUSTON, May 30, 2018 (PCW) -- Spot butane and isobutane prices are now averaging at peaks last seen in 2014, PetroChem Wire prices show, on the back of similarly surging RBOB and alkylate prices (see graphs below). Isobutane has spiked recently due to stronger alkylate demand and operational issues.

But just like 2014, these fundamentals are occurring amid a larger surge in the petroleum complex. Crude is at multi-year highs, as is RBOB gasoline and spot alkylate. These are crucial to note as both normal butane and isobutane’s greatest sources of demand come from gasoline blending.

Normal butane demand can peak at as high as 800,000 b/d during the winter gasoline blending demand season, when it becomes one of the primary blendstocks. During the low-demand summer blend season, however, butane demand can bottom out at around 60,000 b/d. Conversely, 80-85% of isobutane production goes into the production of alkylate, which has a higher octane rating. Alkylate is the primary blendstock in summer gasoline.

Will this strength persist? Crude, gasoline and alkylate price signals remain bullish throughout the month at the very least. While butane could be countered by overall lower demand during the summer blend period, the continued operational issues and stronger demand on the isobutane side should provide a price floor in the near term.

Forward curves, however, show deepening May/Jun backwardation for iso, indicating the front-month surge could well be short-lived. Butane, however, has seen its backwardated structure narrow in recent weeks, suggesting its current strength could remain through 3Q. -- Samantha Hartke

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