The European MTBE factor reached its highest level in eleven months Tuesday supported by ongoing demand for exports, according to market sources.
The factor was calculated at 1.204, with MTBE FOB ARA at $1,147/mt versus Ebob gasoline at $952.75/mt.
Meanwhile, a shortage of material in the US Gulf Coast has been incentivizing European producers and traders to maximize profits by filling the void created in South American MTBE markets.
"I think it will remain strong, [there is] a lot of stuff leaving Europe," one source said, noting that traders such as Litasco and Gunvor have taken as much as 35,000 mt out of the market for export.
These cargoes are mostly destined for South and Central America, with Venezuela and Mexico taking the majority of material, sources said.
Additional demand for MTBE is also coming from the Mediterranean, with an Algerian MTBE tender earlier in February at 20,000 mt, on top of a gasoline tender according to which a maximum of 15% volume of MTBE can be used as an octane booster.
However, MTBE is mainly supported by exports more than blending demand in Europe and the Mediterranean region.
The MTBE factor has been strengthening since December 2, when it reached its lowest level for 2013 at 1.10. The factor on Tuesday was the highest since March 22, 2013.
Unlike in March 2013, European prompt blending economics do not justify the strength in the factor, as the mogas/naphtha spread, an indication of blending economics profitability, was calculated at $28.25/mt Tuesday, compared to $105/mt last March when the factor was at similar levels.
Reflecting the strength seen in the factor, European MTBE gross production margins have also seen strength recently, according to Platts data.
In February 2014, the average gross MTBE production margin stood at $311.50/mt, reaching its highest level since August 2013, $399/mt, and after the lowest level of the year in December 2013, $156/mt.
