An Arbitrage Opened Following a Sharp Increase in European Mtbe Prices

An arbitrage to move cargoes of methyl tertiary butyl ether [MTBE] from Asia to Europe has opened following a sharp increase in European MTBE prices on the back of growing demand, trading sources said Friday. 

European MTBE prices hit a near three month high at $1,333.25/mt Thursday based on the Platts European MTBE FOB Amsterdam-Rotterdam-Antwerp [ARA] barge assessment. 

It is the highest level since September 28's $1,345/mt. 

European MTBE prices have climbed on account of reduced availability amid strong export demand to South America with Morgan Stanley reportedly buying 37,000 mt of MTBE in the ARA barge market earlier this week in order to cover a short to Venezuela. 

Asian MTBE prices are currently valued at $1,156.50/mt based on Friday's Platts FOB Singapore MTBE assessment, which means Europe is currently pricing at $176.75/mt over Asia. 

"I have heard some traders are looking to move cargoes of MTBE from Asia to Europe as prices are so high [in Europe]," a Chinese trader said Friday. 

Factoring in freight between Asian and Europe -- estimated at around $90/mt based on loading 10,000 mt, and extra logistic costs -- traders said economics certainly appeared favorable to ship MTBE from Asia to Europe. 

"At current differentials the arbitrage is workable but it could be closed quickly due to price volatility in both regions," a trader said. 

However, a major contributing factor was whether spot prompt tonnage was available, with vessels said to be tight across South Asia. 

"For prompt tonnage, there is no way. There are no available vessels to transport MTBE right now," a Singaporean ship broker said Friday. "Ships are headed to the Arab Gulf or are on term contracts. [In] the second half of January maybe there are vessels available."