Prices rose on a lack of supply as Gunvor closed a refinery and storage filled the gap, writes Peter Wilton
Supply constraints supported barge and coaster butane prices in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub last month, pushing them far above seasonal norms.
Barge prices relative to naphtha rose to 106pc cif ARA at the end of last month compared with a five-year average in January of 99pc. Typically butane barge prices spike when gasoline blending demand firms, although last month's gains were supply led. Much of the recent bullish sentiment derives from trading firm Gunvor mothballing its 75,000 b/d Rotterdam refinery in December, according to market participants. The small plant supplied butane for the firm's own ARA blending operations as well as to the wider market, meaning its closure has cut supply by 6-8 barges/month, they say.
This lack of refinery supply is at times leaving petrochemical firm Ineos' 80,000t butane storage in Antwerp as the sole source of barges, driving prices higher. The primary function of the storage facility is to break large cargo deliveries down to butane shipments along the Rhine to the firm's Koln steam cracker complex. Ineos owns four "mega" barges for this purpose — two of which can carry 2,670t and the other two 3,250t, compared with 1,000-1,300t on standard barges.
Strong barge prices push blenders to the larger coaster market, which is typically more dependent on petrochemical buying. But coaster supply from gas processing in the North Sea is being undermined by Europe's high natural gas prices that encourage producers to leave as much LPG in the gas stream as possible. Supply-side constraints, and additional buying from blenders looking to seaborne supply, have seen cif ARA coaster assessments rise from 97.5pc to 104pc since late-December, compared with a five-year January average of 96pc.
