The availability of coaster butane cargoes in Northwest Europe has started to tighten on signs of increased gasoline blending demand, according to industry sources.
Refineries in Northwest Europe produce gasoline in the summer which has a low vapor pressure and only needs small volumes of butane blended into it.
Surplus butane not required for blending is then exported from refineries in coaster cargoes, which are typically between 1,000 and 3,000 mt in size, and are then used as an alternative petrochemical feedstock to naphtha providing the delivered butane price is at a discount to the delivered naphtha price.
Winter grade gasoline, however, requires a much higher quantity of butane to be blended into it to increase the vapor pressure which helps vehicles to start more easily during cold winter weather.
According to sources there are now the first signs that refineries are reducing exports in order to keep more butane in readiness for the switch to winter grade gasoline.
"It [butane] is slowly drying up," said one source. "I now see more demand than supply."
Based on Platts data, the CIF butane/naphtha price spread was around 93% at the beginning of August, but has now started to increase as butane supplies tighten reaching a last published level Friday of 94.6%.
