Asia MTBE price rise, outlook linked to crude, Europe demand

17 August 2009 09:52  [Source: ICIS news]

By Desmond Chia

SINGAPORE (ICIS news)--Asian methyl tertiary butyl ether (MTBE) prices have risen sharply recently due to higher crude values and tighter availability from the Middle East, but future outlook is linked to demand from Europe, industry sources said on Monday.

Asian MTBE prices rose to $770-780/tonne (€539-546/tonne) FOB (free on board) Singapore on Friday, according to global chemical market intelligence service ICIS pricing.

Prices had dropped below $700/tonne FOB Singapore in the first half of July due to falling crude values. Crude was above the $70/bbl mark early last week but came down by the weekend.

Suppliers said prompt availability was so tight in Asia that buyers had to work out premiums in the high teens to low $20s/tonne over current market quotes to secure any available cargoes.

Market sources said cargoes from the Middle East would be available by early September, rather than the second half of August as had been expected earlier, because of higher domestic demand in the Middle East and exports to Europe.

A major Middle Eastern producer was said to be running its plants at close to full rate, but most of its supplies had been diverted to northwest Europe (NWE) due to better prices there.

MTBE prices in Europe had hovered around $850-866/tonne FOB ARA (Amsterdam, Rotterdam, Antwerp) before falling by $36-52/tonne late last week.

Middle Eastern producers had preferred selling cargoes to the west because Singapore prices were lower while freight rates were the same for Asia or Europe, suppliers said.

European players had soaked up much of the MTBE supplies from the Middle East because of surging demand for mogas from the US, which had resulted in tight mogas availability in Europe, contributing to healthy blending margins, market sources said.

The sudden flat price rally of US gasoline to over $735/tonne in early August had opened the arbitrage window from NWE to the US.

The higher gasoline values in the US were due to sudden outages of refineries as well as healthy demand due to the summer driving season from June to August.

However, traders said that as the summer driving season was coming to a close, US demand for mogas was likely to fall, subsequently weakening the demand for MTBE from Europe. Traders said it was too early to say how much that would affect the demand and price of MTBE in Asia.

($1 = €0.70)

For more information on MTBE visit ICIS chemical intelligence
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By: Desmond Chia
+65 6780 4359



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