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Analysis: Venezuela sanctions weigh on US MTBE prices

Houston — The sharp dropoff in Venezuela's purchasing of MTBE, as reflected in the most recent US International Trade Commission data, has dragged prices for the US product to multi-year lows relative to associated markets.

S&P Global Platts assessed the US MTBE market at 208.95 cents/gal Friday, which was 1.12-cent discount to NYMEX RBOB gasoline futures and a 18.68-cent discount to European pricing.

US MTBE typically trades at a premium to both.

Historically, Platts has assessed US MTBE at a 10-cent premium to the European market and at a premium to RBOB futures that can fluctuate between 20-40 cents.

The US market has weakened sharply over the past several months as demand for MTBE has waned, largely due to sanctions the US government has levied on Venezuela.

MTBE is a gasoline blending component that boosts the octane of fuel. Its use was practically banned in the US in the early 2000s, leaving US producers exclusively dependent on export markets.

Mexico has been the largest buyer of US MTBE for years, with Chile and Venezuela vying for the second spot.

The countries took 65.7%, 18% and 13.5%, respectively, of US MTBE exports in 2018, according to ITC data.

In 2019, however, sellers have had to cope with Venezuela's departure from the buying landscape.

Venezuela imported 30.7 million mt in January, accounting for 29.7% of the US' total exports of MTBE in the month, but none in February.

That lack of buying brought US exports down by 20.7 million mt, or 20%, from January to February.

Mexico took in more product in February, increasing its monthly buying by more than 10.5 million mt, but it still did not make up for the loss of Venezuela.

Until sellers can find a new home for the displaced product, US MTBE prices could continue to face pressure.

--Josh Pedrick,

--Edited by Pankti Mehta,