High naphtha prices this week in Northwest Europe have driven some demand into the LPG complex, even though butane prices are at multi-month highs.
On Wednesday, the Northwest European CIF naphtha cargo price was assessed against the CIF NWE front-month swap at a 29-month high of $11.75/mt, driven by strong gasoline blending demand from the US following Hurricane Harvey, which has tightened supply in Northwest Europe.
Demand for CIF butane coasters is transitioning to gasoline blending demand, but is also receiving unusual demand from petrochemical buyers, given the high prices, according to some sources.
Petrochemical buyers use butane and propane as alternative feedstocks to naphtha for their crackers, typically when prices of butane are at a large discount to naphtha.
But scarce supplies of naphtha in Northwest Europe following Hurricane Harvey have pushed some of that demand onto LPG markets.
On Wednesday, CIF butane coasters in NWE were assessed at $487/mt or 97% relative to naphtha, a near seven-month high, where prices have been stuck for nearly a week.
"We are moving closer and closer to parity," a source said.
Butane prices have also been supported by tight supply in the region, which has kept trade thin, due to maintenance at several refineries in Scandinavia and at BP's Rotterdam refinery, which is expected to last until mid-October.
There has also been lingering demand for propane from petrochemicals, sources said, where large propane cargoes are now roughly level to butane against naphtha.
On Thursday, the propane large cargo market was assessed at $483/mt, or 96% relative to naphtha, down from nearly 97% the previous day.
That represents an unusual reversal of the summer trend, where propane's unseasonal support meant it was far higher than butane, and attracted almost no petchem buying.
"Typically you would say zero propane demand going in [to petchems], or just keep with what's available," at these prices, a source said. However, the industry is weighing tightness across the feedstocks in the wake of Harvey, they added.
