European MTBE prices slump, following gasoline
Date: 19-Oct-01
Country: UK
Author: Neil Chatterjee
Bids for MTBE, a blending component that reduces environmentally harmful emissions, sank to about $235 a tonne yesterday, from $255 at the beginning of the week.
Offers plummeted to around $240 a tonne, after holding up at $270 on Monday. They were around $300 at the beginning of October.
"It's the slide on gasoline, crude, and recession fears," said a MTBE trader.
Prices for the oxygenate component, which often makes up around eight per cent of gasoline to make it cleaner burning, are closely linked to the notor fuel.
Premium grade refinery gasoline barges traded as low as $181 a tonne yesterday, dragged lower by oversupply after being at $195 at the beginning of the week and around $280 a month ago.
"As long as there is low demand for gasoline in Europe MTBE is not needed," a trader said.
A global downturn triggered by the September 11 attacks on U.S. cities and the end of the northern hemisphere driving season have cut car use sharply.
Demand in the U.S. for MTBE to make reformulated gasoline has also been absent this week, since traders have been attending the industry's Dewitt conference in Houston, which finishes yesterday.
Traders also cited barge congestion and soaring freight rates along the Rhine as putting off prompt buyers.
A combination of low water levels and difficulties in finding barges following the German switch to cleaner 50ppm sulphur fuels has reduced capacity and seen freight rates more than triple, German traders said.
High demand for heating oil and German refineries restarting after maintenance shutdowns have also added to a surge in barge requirements this month.
Boats are allowed to dock for 24 hours before having to pay extra, but queues of up to 15 barges at some berths have made waiting times shoot up to over two days.
"You have to pay about double. There's less product moving as a result," a MTBE trader said.
Traders said they thought prices had even more potential to the downside, with benchmark Brent crude hitting two year lows yesterday.