The factor had fallen from 1.2420 on October 21 to be assessed Wednesday at 1.1567, according to Platts data. This lower factor equated to an MTBE fixed price of $869/mt FOB Amsterdam/Rotterdam/Antwerp, down $13/mt.
Although supply inventories were considered tight, the gasoline-naphtha premium was pricing at a negative $16.75/mt value, meaning that anyone considering blending MTBE in gasoline, would not see a profit from the exercise unless the value of MTBE versus gasoline barges dropped low enough to make it cheap to blend.
With Naphtha assessed at $768/mt CIF NWE and eurobob at $751.25/mt, few blenders would consider choosing MTBE to blend.
In today's MTBE Platts Market on Close assessment process only sellers were seen and a majority of them were oil majors and blenders, pulling prices lower.
"Shell Trading for me is a (sign that they and majors don't need it. The likes of Gunvor and STR see better value in selling due to poor blending value," an industry-player said.
"You only have to look at historicals. In December 2009, and January, February and March [2010] we saw very high numbers due to high demand for exports. If we don't see buyers, such as blenders or exporters, who are not critical about price, then we are going to need to see some weak numbers," a
second industry-source said.
This time last year, the MTBE factor was assessed at close to 1.4, according to Platts data (November 6 2009).
Although some sources said that the factor would have to go to a low of 1.10 to attract any blenders others suggested that it was unlikely to go to as low as this because there is so little product in storage.
"I could see it slipping to 1.15 but not 1.10," the second industry-player said.
"There are no buyers and nobody is picking up product. With the problems in France (largely over), factors will go lower and they should go lower. We have the highest numbers globally and at 1.18 (Tuesday's assessed factor), it is too high for blenders. It makes more sense to buy the finished gasoline. Blending economics don't work so the only reason is to correct a blend," a trader said.
But price volatility was set to remain due to the low level of inventories even though prices are dragging lower.
"If someone needs 5-10 kt in the prompt no one has it. Supplies are very low but demand is also lower. The next few days will give us some direction," the second industry-player said. "If anyone thinks that the we're long they are wrong," the first industry-player said.
During the Platts Market on Close assessment process Wednesday, three trades were done. A 1kt November 11-15 (MW) parcel was done at $871/mt FOB ARA, STR selling to LyondellBasell. A further 1kt MW deal was later done at $869/mt with Lyondell lifting a Neste offer. Towards the end of assessment, Lyondell lifted STR's November 8-12 offer at $863/mt FOB ARA for 1kt.
Sources said that the gasoline market structure, previously seen in backwardation at around $9/mt between November and December was narrowing, with $7/mt seen in the market earlier. The MTBE market structure however flipped into a contango today with the front end trading $6/mt below the MW. Eurobob gasoline was assessed at $751.25/mt FOB Rotterdam.
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.
