Midcontinent butane prices leap on refinery upsets

Market: LPG, Oil products
14/01/15

Conway butane and isobutane prices surged today and the forward month's backwardation widened as refinery upsets and increased blending demand supported prices.

Midcontinent butane gained 7.3pc midmorning compared with the prior day, trading at 75.5¢/USG. Prices rose as the January leg of a spread trade closed at an intraday high of 84¢/USG, up 19pc from the prior day's midpoint.

Spread trades against February priced the forward month at a sharply wider 5.75-6.5¢ backwardation, up from 3¢ earlier in the week.

Conway isobutane prices surged this week, hitting 82¢/USG in today's session, up 15.3pc from the start of the week.

Increased pipeline connectivity between Conway and Mont Belvieu in the past year and half has resulted in more y-grade moving directly to the Gulf coast for fractionation, leaving the midcontinent less supplied with purity products. With less supply available in the midcontinent, disruptions to supply and demand can spur greater volatility in the Conway market.

The spike in midcontinent blendstock prices follows outages at several refineries in the midcontinent. BP over the weekend saw a smaller crude distillation unit at its 410,000 b/d Whiting, Indiana, refinery go down because of freezing temperatures. It is now back online while a reformer unit connected to the crude unit is in restart mode.

Other midcontinent refineries, including a 170,000 b/d Lima, Ohio, refinery; Marathon's 204,000 b/d Robinson, Illinois, facility and Phillips 66's 356,000 b/d Wood River, refinery have also experienced upsets this week.

The market saw an increase in demand for blendstocks, including butane and isobutane, following the regional refinery problems.

As demand for midcontinent blendstocks strengthened, Conway's premium relative to Mont Belvieu strengthened. Conway butane averaged roughly a 3.375¢ premium to Mont Belvieu today, up from an average of 1.1¢ so far this month. Midcontinent isobutane averaged approximately a 9.625¢ premium to the Gulf coast, up an average of 6.3¢ this month.

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