The spot butane coaster price in the West Mediterranean region rose to a more than four-month high Tuesday on months of sparse supply in the region and buying to serve Moroccan consumer demand.
The butane FOB West Med coaster was assessed at $490/mt on Tuesday, or 106% relative to naphtha, the highest since March 20.
That represents a 7% jump on the previous day, putting the West Med coaster above parity to naphtha for the first time since March 30.
The price jump builds on a steady rally on the FOB butane market since late June, when prices turned sharply upward on a lack of local supply. Since June 23, prices for FOB coaster markets have risen by nearly a third relative to naphtha.
The price jump is largely due to a lack of supply in the region to serve local consumer markets, particularly Morocco, sources say. Morocco is the largest short in the West Med, importing around 2.2 million mt a year for heating and cooking fuel.
That market has also become much more competitive over the last year, with the number of trading participants active in the region roughly doubling.
That diversification follows a move by the Moroccan government in 2016 to liberalize its butane import system, allowing for more flexibility in how traders and suppliers buy and ship product over the course of the year.
But in the region, that product has not been available. The closed arbitrage from the US Gulf Coast to Europe and Morocco has also tightened supply this year across the butane complex, helping constrict the butane market as a whole, sources say.
Local refineries in the Med have largely committed product to petrochemical players who buy inland at more competitive prices, with few offers available for product on coasters besides high-priced storage material for most of the summer.
Market sources now say there is very little spot product available until at least September from local suppliers.
That has left suppliers into Morocco looking North for that butane supply, which evens out to an estimated 180,000 mt a month or more for Morocco alone.
"Most of that has to come from the Northwest Europe [butane market]" one source said. "The question is, are there 180,000 mt in Europe?"
Prices have also risen in Northwest Europe market, with butane supply in the region constrained by maintenance at the UK's Grangemouth field-grade export terminal, which is expected to last until the end of the month, and demand for butane as feedstock for petrochemical buyers on the CIF market.
That demand has also pushed up FOB NWE butane coasters and CIF coasters, with both sitting at more than four-month highs.
FOB coasters were last assessed at 93% relative to naphtha, while CIF coasters were at 89% compared to naphtha.
"This is unusual for summer," a source said Tuesday. During the summer, demand for butane for heating and blending is typically low. Prices feel like the market is in the "middle of December", they added.
Prices in December 2016 were also in the low 100% range relative to naphtha.
However, the tightness in the West Mediterranean could flip quickly as soon as more supply is available, a source said.
"We just need to have one thing change," they said. "If the [US to Europe] arb is open, everything can change."
