Gasoline Blending

Anything but normal might be the best way to characterize today’s market for normal butane. Butane production at gas processing plants and fractionators is at or near an all-time high. Butane consumption by steam crackers is maxed out, and so were butane exports until new dock capacity came online this fall. Butane inventories? They’ve risen to record levels too, and this summer, butane prices fell to their lowest mark in more than a decade. Now, with winter-gasoline blending season in high gear and new room for export growth, butane prices at Mont Belvieu are up more than 35% from where they stood a month and a half ago. What does all this mean for the butane market this winter? Today, we discuss recent trends in normal butane production, consumption, exports and stocks.

We are rapidly approaching September 15, when summer blend motor gasoline changes over to winter blend, allowing the increased use of high vapor pressure normal butane in the blending.  However, the spread between Reformulated Blendstock for Oxygenate Blending (RBOB, the benchmark unleaded gasoline) and normal butane was down to 85 cents/gal as of the end of August, reducing the incentive to blend as much butane into motor gasoline as possible to its lowest level in recent years.  Sure, 85 cents/gal is still 85 cents.  But what impact might that smaller RBOB/normal butane spread and other market factors have on butane exports?  Today we examine the state of the gasoline blending and normal butane markets, and the effect that current dynamics –– a gasoline glut and strong butane prices among them –– ­­may have.

All the export LPGs on the West Coast are in a tank in the middle of Washington State in somebody else’s name.   So if you’re dreamin’ about LPG exports, the West Coast is a brand new game.  Apologies to Larry Gatlin.

On March 4th, Petrogas announced the purchase of the Ferndale, WA LPG terminal, the only functioning butane and propane export facility on the U.S. west coast.  Then last Thursday (April 10th) Sage Midstream announced a project to build another world scale LPG (liquefied petroleum gas) export terminal a couple of hundred miles south at the Port of Longview, WA.  These are big developments for the west coast LPG markets. Today we begin a blog series that examines the history of Ferndale, how it has been used in the past, and what these two announcements mean for the future of west coast propane and butane markets.