US Gulf Coast spot reformate and toluene prices are likely to stay firm in the near term, mostly because of blending requirements that will arise when Venezuela's PDVSA sells its light naphtha and natural gasoline in the US, market sources said Friday.
On Wednesday, PDVSA issued a tender to sell 150,000 barrels of light virgin naphtha along with 100,000 barrels of natural gasoline, lifting from Venezuelan ports during mid-October, with a destination restrictions of either the US East Coast, Gulf Coast or the Caribbean.
The tender included provisions of two additional combined 250,000-barrel cargoes first lifting in November and later in December.
Sources said according to typical trade patterns, it is likely the naphtha will head to the New York Harbor for use as a gasoline blendstock. Although it has in the past also been used as steam cracker feed for petrochemical production.
"[It typically] goes to gasoline blenders, they usually pay better [prices] than petrochemicals," said one trader.
The petrochemicals complex cannot handle MTBE contamination either, he said, referring to traces of MTBE found in Venezuelan naphtha.
The PDVSA refining system sometimes uses the same pipeline for MTBE and naphtha transportation resulting in products mixing, sources said.
The light virgin naphtha and natural gasoline coming out of Venezuela have a gravity range of 75-82 API.
Conventional gasoline in the US typically has a range between 60-65 API, and blendstocks such as reformate and toluene are thus used to attain required specification.
Gasoline blenders rely on reformate, a 1 RVP, 100 octane material, in producing gasoline to specifications, or use a limited amount of toluene to do the same.
According to the latest Energy Information Administration data, refinery utilization in the East Coast stood at 71% for the week ending September 30, lowest of any region in the US.
Low runs in New York Harbor, together with the seasonality of gasoline demand, will keep producers in search of blending components, which will further support already-high prices.
According to Platts data, reformate prices so far this year have averaged 54 cents/gal premium to US Gulf Coast conventional gasoline, compared with an average premium of 42 cents/gal for all of 2010.
The same is true for toluene; Platts data shows its price has averaged 80 cents/gal premium to gasoline year-to-date, while its 2010 average was 63 cents/gal.
On Friday, reformate was assessed at 60 cents/gal premium to gasoline, flat to Thursday, while toluene was assessed at 62.15 cents/gal premium to gasoline, up 10.28 cents/gal from Thursday.
Similarly, light naphtha in the USGC was assessed at 12 cents/gal premium to natural gasoline, up 2 cents/gal from Thursday.
