The normal butane market in Mont Belvieu has been particularly volatile this year, rallying at the onset of the Iran war, retreating, then spiking again in mid-May before steadily easing over the following weeks. Even so, normal butane continues to trade at a strong relative value, supported by healthy export demand and a summer motor gasoline blending waiver.
A good way to measure butane's relative value is to compare the ratio of normal butane to WTI crude oil with the ratio of propane to WTI. This removes the influence of crude oil price fluctuations and compares normal butane with a similar NGL that shares many of the same supply sources and demand characteristics. As shown in the left graph below, normal butane has traded at an average premium of 10% of WTI over propane’s ratio since 2018 (red line), but that premium has been trending higher, reaching 13% so far this year (blue line). The long term increase is primarily due to exports moving to stronger retail demand markets for butane (cooking fuel, etc.) in Africa, India and developing countries in East Asia.
