Houston — Strong export demand for butane pushed prices in the Mont Belvieu, Texas, NGL storage and fractionation hub to a four-year high Tuesday, market sources said.
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July non-LST butane, reflecting prices at the Enterprise facility in Mont Belvieu, spiked 9.5 cents to $1.40/gal.
Butane was last assessed higher on February 19, 2014, at $1.41/gal. At that time, crude futures were trading at $103.31/b, putting butane at about 57% of crude. In contrast, NYMEX August WTI settled at $68.52/b Tuesday, putting butane's relative value at 86% of crude futures.
Butane averaged 69% of crude over the first three weeks of July, but spiked to 81% on Monday and strengthened further Tuesday.
The strength in the front month was evident in a 24-cent/gal July-August backwardation, a 36.25-cent premium over refinery-grade butane and a 60-cent premium over Conway, Kansas, product.
Most market sources contacted Tuesday pointed to growing exports of butane for the more than 21-cent price swing since Friday.
"Seeing players who can't afford to be short physical barrels on the bid, so makes sense," a source said of market suggestions that export demand was driving prices higher.
In fact, sources have anecdotally noted an increase in split LPG cargoes. Trafigura last week bought a 34,000 mt butane cargo from Enterprise for late August loading.
US LPG exports in May climbed to the highest monthly total on record, topping 1.2 million b/d, according to the latest US Census data compiled by S&P Global Platts Analytics. Butane made up 17% of the total, up from 14% in April.
"Butane is roofing," a trader said. "Could be exports but it's also the end of the month and August is not really following it up, [so] it could be a short squeeze."
BACKWARDATION NARROWS DOWN CURVE
The market's backwardation was heard to be narrowing down the curve with August/September heard at 5 cents/gal and September/October at 2.25 cents/gal. While some suggested gasoline blending for the higher-RVP fall spec may have started, gasoline sources disagreed.
"The RVP switch is in September ... so [lower RVP gasoline production] is planned for late August," one USGC gasoline trader said, adding that higher butane values along the Gulf Coast reflect strong export demand as the Asian arbitrage remains open.
The markets for 9 RVP benchmark CBOB and conventional grade gasoline both remain in backwardation, reflecting, among other factors, the transition to a higher RVP specification after the Labor Day holiday.
S&P Global Platts assessed benchmark CBOB at 9 RVP at NYMEX August RBOB futures minus 11.95 cents/gal based on activity in the Plats Market on Close assessment process, down 50 points on the day and up 5 points from the differential's year-ago assessment.
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