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Saudi Aramco's MTBE trading volume likely to rise after Sabic purchase

singapore — Saudi Aramco's methyl tertiary butyl ether trading volume is likely to increase sharply after the company inked the megadeal of buying Saudi Basic Industries Corp's, or SABIC's, petrochemical units.

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Late March, international media reported that Saudi Aramco had agreed to acquire a 70% stake of SABIC.

Once the acquisition is complete, Saudi Aramco's MTBE capacity will reach around 2.37 million mt/year, which will be the largest for a single company across the Middle East and Asia, an industry source close to the company said on Tuesday.

Currently, Saudi Aramco is running two MTBE units in Saudi Arabia -- a 150,000 mt/year unit by Petro Rabigh in Rabigh and a 120,000 mt/year unit by Saudi Aramco Refining Ltd, or SAMREF, in Yanbu.

Saudi Arabia produces around 3.07 million mt/year of MTBE, the largest in the Middle East and Asia, followed by China at 2.47 mil mt/year, South Korea at 994,000 mt/year and Taiwan at 680,000 mt/year, according to S&P Global Platts data.

Meanwhile, several market participants were concerned about the global overhang in MTBE supply, due to the IMO2020 mandate as well as E10 mandate by 2020.

"Due to the IMO2020 mandate, more refineries are going to use lighter grade of crude, which tends to yield more light distillates, including gasoline and naphtha," a trader based in Singapore said.

"Moreover, China is shifting from using MTBE to ethanol under the E10 mandate by 2020, which will sharply reduce the demand for MTBE as a gasoline blend stock," the trader added.

China targets to blend 10% ethanol into its gasoline supply nationwide by 2020 and is currently enacting the E10 mandate in phases, on a province-by-province basis.

--Michelle Kim, michelle.kim@spglobal.com

--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com