Mont Belvieu Iso-Normal Spread Soars To Record High

The iso-normal price spread (Mont Belvieu non-TET) has skyrocketed since early March hitting a record high of 54.6 cents/gal on May 6.  As shown on the left-hand chart below it has been both stronger isobutane and weaker normal butane prices behind the run-up in the spread.  Non-TET isobutane prices (orange line) have rallied by ~25 c/gal since early March due strong demand to produce MTBE and alkylate for octane enhancement. Isobutane demand was also increased recently with the start-up of Next Wave’s ethylene to alkylate plant in early April.  In contrast, normal butane (blue line, left-hand chart) has fallen by about 22 c/gal over the same period, with the ratio to WTI crude oil declining 10 percentage points to 44% mainly due to weaker seasonal demand for gasoline blending. The iso-normal spread has been volatile this year hitting a low of just 1.5 c/gal (red line, right-hand chart) in mid-February.  It has been straight up since that time for the price differential with it averaging 19 c/gal in March, 32 c/gal for April and 53 c/gal so far in May.