The European MTBE factor continued to slip Monday, driven by lackluster demand and seller pressure despite continued tight supplies and a firm Asian market.
The MTBE factor was assessed at 1.112, down versus Friday's level of 1.1160. This was equivalent to a fixed price of $856/mt. Platts assessed MTBE barges at $863.50/mt on Friday.
MTBE is assessed at a factor--effectively a percentage ratio--to Eurobob gasoline to reflect the economics of blending the component into the road fuel.
Without a defined contango structure or incremental demand from a tender, the factor was drifting despite continued low inventories, sources said. This was represented by the ample selling interest seen in the Platts Market on Close Assessment process.
"Europe is trading in isolation to the global tightness," a trader said. "It is pricing below China bid interest. There are turnarounds in the AG [Persian Gulf] and continued buying interest in the Far East and US production is committed. I don't think there's much inventory in tanks, so if you needed 5,000 mt for export you'd see the price rallying."
The source said he expected a contango structure to develop but it was still too far away to encourage buyers for storage or for blending. "The risk-reward of owning it is better at 1.12 [versus the Eurobob gasoline swap] than at 1.22," he said.
There was little interest in blending high octane, low Reid Vapor Pressure components such as MTBE since naphtha was pricing $23/mt above Eurobob gasoline barges at $793/mt CIF Northwest Europe, according to Platts data on Monday. Eurobob gasoline barges were assessed by Platts at $770/mt FOB AR. This negative spread made blending high octane components uneconomic.
Naphtha is often used to boost volumes of low octane gasoline, which require high octane components
The strength seen in Asia was keeping Europe tight as Persian Gulf producers decide where to send re-supply, and at the moment China was dictating this, according to sources. In addition feedstock butane costs were limiting how much producers would produce and be willing to store, sources said.
"China is pulling like crazy," a second industry source said. "US Gulf Coast is not well supplied so [there are] not a lot of tons there. Mediterranean demand is steady. There is good seasonal demand and it is exceeding expectations."
The cost of butane compared to the price of MTBE is very high, the source said. "Butane is so high that producers will not be interested in selling at these factors," he said.
There was also some disagreement as to the level of market structure, with some market sources suggesting that the market could be in contango. "I still think it's flat to backwardated," one industry-player said.
During the Platts MOC process, a 1,000 mt parcel for November 22-26 (MW dates) traded at $856/mt FOB ARA, Astra Oil Trading selling to Morgan Stanley, the only buyer in the MOC window Monday. Morgan re-bid at the lower level of $850/mt FOB ARA and this bid was taken by Argus Oil.
The MTBE factor was assessed at 1.112, down versus Friday's level of 1.1160. This was equivalent to a fixed price of $856/mt. Platts assessed MTBE barges at $863.50/mt on Friday.
MTBE is assessed at a factor--effectively a percentage ratio--to Eurobob gasoline to reflect the economics of blending the component into the road fuel.
Without a defined contango structure or incremental demand from a tender, the factor was drifting despite continued low inventories, sources said. This was represented by the ample selling interest seen in the Platts Market on Close Assessment process.
"Europe is trading in isolation to the global tightness," a trader said. "It is pricing below China bid interest. There are turnarounds in the AG [Persian Gulf] and continued buying interest in the Far East and US production is committed. I don't think there's much inventory in tanks, so if you needed 5,000 mt for export you'd see the price rallying."
The source said he expected a contango structure to develop but it was still too far away to encourage buyers for storage or for blending. "The risk-reward of owning it is better at 1.12 [versus the Eurobob gasoline swap] than at 1.22," he said.
There was little interest in blending high octane, low Reid Vapor Pressure components such as MTBE since naphtha was pricing $23/mt above Eurobob gasoline barges at $793/mt CIF Northwest Europe, according to Platts data on Monday. Eurobob gasoline barges were assessed by Platts at $770/mt FOB AR. This negative spread made blending high octane components uneconomic.
Naphtha is often used to boost volumes of low octane gasoline, which require high octane components
The strength seen in Asia was keeping Europe tight as Persian Gulf producers decide where to send re-supply, and at the moment China was dictating this, according to sources. In addition feedstock butane costs were limiting how much producers would produce and be willing to store, sources said.
"China is pulling like crazy," a second industry source said. "US Gulf Coast is not well supplied so [there are] not a lot of tons there. Mediterranean demand is steady. There is good seasonal demand and it is exceeding expectations."
The cost of butane compared to the price of MTBE is very high, the source said. "Butane is so high that producers will not be interested in selling at these factors," he said.
There was also some disagreement as to the level of market structure, with some market sources suggesting that the market could be in contango. "I still think it's flat to backwardated," one industry-player said.
During the Platts MOC process, a 1,000 mt parcel for November 22-26 (MW dates) traded at $856/mt FOB ARA, Astra Oil Trading selling to Morgan Stanley, the only buyer in the MOC window Monday. Morgan re-bid at the lower level of $850/mt FOB ARA and this bid was taken by Argus Oil.
