European MTBE market starts new year on unusually bearish note

London — The European MTBE market has kicked off the year on a more bearish footing than usual due to slower demand from the gasoline blending market.

The product's factor -- the relationship of gasoline blendstock MTBE to spot Eurobob barge prices -- was assessed at 1.094 on Jan. 5, the lowest seen at this point in year since 2012, when Platts started publishing the indicator. That came on the back of a continued downtrend since June 2020, after the factor opened the month June 2 at the high level of 1.383.

"[Low MTBE factor was] expected as gasoline demand in Europe is poor and it may get even worse in the next couple of weeks before picking up again," one trader said.

Usually, the MTBE factor makes a slow start to the year before picking up ahead of the spring gasoline specification change from winter to summer grade.

However, poor blending margins for high octane components and concerns over coronavirus measures present a bleak picture for the gasoline demand recovery outlook in the European market this year.

With gasoline remaining weak against naphtha, it has become less profitable for gasoline blenders to use naphtha as a blending component, signifying also less need for octane boosters such as MTBE and aromatics.

However, MTBE, a high octane, low RVP and low density component, has seen its premium to EBOB come under pressure, according to one blender

Low MTBE prices could favor storage, with the blending economics along the gasoline-naphtha futures curves looking unlikely to improve at least until the second quarter of 2021.

The MTBE outright price was assessed at $508.25/mt FOB ARA Jan. 5, with EBOB at $464.75/mt. MTBE's premium to EBOB gasoline front-month swap last calculated at $45.50/mt on Jan. 5, flat to Jan 4.