Stronger Alkylation Demand Helps Isobutane Prices

The start of November saw NGL prices continue to drop in value as demand continues to fall from the consumer, petrochemical and export markets. However, greater demand for isobutane alkylation helped those prices at both hubs this week.

According to preliminary reports from En*Vantage, propylene prices may be low enough that it is being alkylated. “If this is happening, it will increase the demand for isobutene because alkylation of propylene uses more isobutane than butylene alkylation.”

Conway isobutane improved 1% from last week to $1.87 per gallon (/gal), though this was the second-lowest price at the hub in three months. In addition to increased alkylation demand, this price improvement at Conway was also partially due to the price balancing after it had been driven up due to a shortage in the Mid-Continent. After this situation was rectified, the price dropped sharply the week of Oct. 19.

Despite this increased demand, Mont Belvieu isobutane dropped 1% in value to $2.08/gal. This decrease was primarily due to a decrease in crude prices, which had a negative effect on heavy NGL prices. This week’s price still remained at the same level it has been for the previous two weeks. If the crude price had improved or been stagnant, it is likely that Mont Belvieu isobutane would have improved.

The Conway price for butane had the largest increase of any NGL at either hub this week as it rose 2% to $1.55/gal, its highest price in a month. Like its sister product, isobutane, this increase was at least partially due to the market re-balancing itself after the butane price had fallen more than 10¢/gal the previous four weeks at the hub.

Although ethane remains the most preferred feedstock to crack, prices fell at both hubs as ethylene prices have been flat in the U.S., Europe and China due to the global economy seeming to slow down in the past month.

Despite experiencing a 3% decrease, Mont Belvieu ethane prices remain strong at 92¢/gal. This was the second-highest price at the hub since the week of Sept. 3, 2008. By contrast, the weak Conway market saw ethane prices continuing to fall as they were down 4% to 36¢/gal. This was the lowest price at Conway in more than a year as capacity out of the Mid-Continent remains tight.

The NGL facing the most headwinds is propane as demand has been falling from all end-user markets and inventories are now building at a brisk pace. For the week of Oct. 28, propane inventories increased 1.15 million barrels. En*Vantage estimated that propane cracking has fallen below 350,000 barrels per day.

The decrease in crude prices resulted in lower prices for C₅₊ at both Conway and Mont Belvieu. The Conway price dropped 4% to $1.92/gal as the gap between it and isobutane again narrowed back to 6¢/gal. The Mont Belvieu price was down 1% to $2.27/gal, its lowest price in a month.