Expensive high octane blending components such as MTBE and reformate have provided strong support to finished grade European 10 ppm barges when compared with the EBOB blendstock, sources said Thursday.
Platts assessed 10 ppm barges at $1,174.75/mt on Wednesday, a premium of $25.75/mt to EBOB barges, which were assessed at $1,149/mt.
Through much of January and February, the 10 ppm premium to EBOB has hovered around $7-10/mt, but since March 1 the average premium has been $20/mt, according to Platts data.
EBOB is a blendstock that enables companies to add ethanol to meet European biofuels requirements, and therefore has a lower octane level than the 95 RON minimum of 10 ppm barges.
Reformate and MTBE in particular have been trading at very high premiums to EBOB in recent weeks, due to strong export demand for components, meaning that finished grades of gasoline such as 10 ppm barges have been at a persistently high premium to EBOB.
Platts assessed MTBE barges at $1,449/mt on Wednesday, a $300/mt premium to EBOB barges or a factor of 1.26. Though the factor has fallen slightly in the past two months, it still represents a challenge for traders needing to boost octane.
For the last five years, the factor has averaged 1.185, and current levels remain unattractive to blenders, traders said.
"With MTBE where it is, it's not going to make much sense to sell 10 ppm barges at anything other than a decent premium to EBOB," said one trader.
Demand for gasoline in to West Africa was also a factor in explaining the high 10 ppm premiums, sources said, with traders sourcing high octane 10 ppm material to blend with cheaper, lower octane naphtha to satisfy demand into Nigeria.
"MTBE being $300 over EBOB helps the premium be more valuable, but it's much better also to buy 10 ppm to fill vessels going to West Africa," said one trader.
