The West Mediterranean butane market strengthened Tuesday to its highest relative value for over three months due to strong incremental buying interest and limited spot availabilities ex-Lavera as well as from outside the region.
Lavera, in southern France, is currently the only source of butane re-supply in the West Mediterranean, but with only one seller heard able to cover existing shorts from this port.
Lavera is traditionally one of the main sources of butane supply in the West Mediterranean.
Looking at alternative sources of supply, the Northwest European butane Seagoing complex also tightened Monday, with FOB tonnes heard to be unavailable below the 90% of physical naphtha mark, thus making the NWE/Med arb difficult to work on a spot basis.
In addition, the trans-Atlantic spot arbitrage has become increasingly difficult to work on the back of strongly rising US spot prices throughout the second half of December. Despite a recent dip in butane Mt Belvieu prices, the spot arbitrage remains closed on paper.
"I think [the tightness] is partly because US prices have gone up so much during the holiday season...to the point there is no arb from the US to the West Med market," a market source said Tuesday.
S&P Global Platts assessed butane West-Med coasters at $527/mt FOB basis Lavera Tuesday, up $31/mt on the day, and at 109.3% of physical naphtha, up from 103.2% Monday.
This is the highest relative value since September 21, when the quote stood at 112.8% versus physical naphtha, Platts data showed.
