A glut of octane and a bullish gasoline market have pushed down European MTBE's factor and its premium to Eurobob gasoline barges, sources said.
With Ebob gasoline barges assessed by S&P Global Platts at $468.25/mt FOB ARA, up $13 from Tuesday, and MTBE assessed at $557/mt FOB ARA, the MTBE factor to gasoline, slumped to 1.19 from Tuesday's 1.23.
Despite healthy demand in the Mediterranean due to a plant outage, global octane supplies, such as MTBE, were deemed as healthy with material also supplied from China.
"Globally there is an excess of octanes and MTBE gains are limited. China is producing a lot of MTBE and there has been an arb open from China and perhaps the Persian Gulf is long," a blender source said.
This meant that Middle Eastern producers would seek to swing MTBE re-supply into Europe if those margins or the factor were outperforming Asia.
With the European MTBE premium over Eurobob gasoline at $88.75/mt, premiums above $100/mt were unlikely with so much MTBE floating around, the same blender source said. "We have stocks and we are happy to sell our stocks at $200/mt [premium if they could]. There has been some demand from Greece and the Israelis but there is no serious [wider] demand," the blender source added.
According to shipping reports, approximately 30,000-40,000 mt of MTBE were heading to the Mediterranean to cover any shorts and a supplier source said that with those quantities there ought to be enough. Northwest European gasoline barges surged on Wednesday in what was dubbed an end-of-season rally, in which prompt summer-grade Eurobob gasoline barges break above a $20/mt premium to the front-month swap during the trading day.
The front-month Eurobob gasoline crack swap rose 65 cents to $6.15/b at the close. The September/October backwardation rose to $20.50/mt from $17.75/mt on Tuesday.
The bullishness on gasoline is being driven by expectations of the refinery turnaround season in Europe around October, with the physical market largely oversupplied.
Expectations of decline of stocks in the US also contributed to the bullish atmosphere in the market.
