Butane cargoes hit 4-month high amid US supply shortages, strong cracking demand

The price of large butane cargoes in Northwest Europe hit a four-month high July 25 amid US supply shortages and strong cracking demand.

Platts, part of S&P Global Commodity Insights, assessed the CIF large cargo market up 2 percentage points on the day as a percentage of naphtha at 80% July 25. This is the strongest the market has been since March 22, when the quotation was assessed at 86% as a proportion of naphtha.

Participants said there has been a slight easing of the shortage of US butane shipments, adding that there were still difficulties securing Gulf Coast volumes.

"Wouldn't say a shortage but it's not easy to get the tons," a source told S&P Global Commodity Insights.

According to Commodities at Sea(opens in a new tab), US shipments of butane into Northwest Europe in July currently stand at 17,100 mt, compared to 56,500 mt in June.

Maintenances at the Karsto and Mongstad terminals have also been keeping supply levels at bay in Northwest Europe, leading to some tightening of fundamentals in the region.

"On FOB nothing [has] traded for a while as nothing is available," a second source told Commodity Insights.

Adding to the tightness, buying appetite for butane in Europe has been on the rise amid strong demand for butane as a feedstock in the petrochemical sector, with participants reporting a lot of crackers are currently purchasing product for their feedslates.

"Petchems are all butane buyers as we speak," the same source told Commodity Insights.

Some participants expressed concerns about lower US volumes continuing past the switch back to winter butane specifications in September, when the market usually sees higher butane demand for use in gasoline blending.

"Think this will affect things if it carries on to September as the market needs those tons for liquidity," the first source added.