OREANDA-NEWS. US butane exports could surge in the coming months because of European petrochemical demand, driving prices higher at the start of the winter gasoline blending season.

Spot butane values rose in July despite declines in crude as more buyers secured volumes for export. US butane averaged a $251/t discount to prices in Asia and a $96/t discount to prices in northwest Europe during the first half of July.

During the same period, butane's value relative to WTI rose from 41.01pc to 46.86pc amid an uptick in demand for material for export. At the same time, its value relative to RBOB rose from 27.72pc to 29.33pc.

Spot butane values rose from 48.75?/USG on 7 July and rose to 56.562?/USG on 17 July.

The increase in butane exports is partly driven by the European petrochemical market, as the heavier feedstock is preferred over naphtha.

US butane is also drawing support from domestic propane prices, as the two compete as ethylene feedstock. Margins for US propane cracking stand at 29.78?/lb, while margins for cracking butane stand at 27.87?/lb.

Buying activity has been steady in the butane market.However it falls short of the robust trade seen in the LST propane market, as buyers secure volumes of the heating fuel ahead of the peak demand months.

The pre-buying will likely lead to a weaker increase in propane values. But if butane export demand continues, butane values could see a larger increase in the winter season when refiners are using butane for seasonal gasoline blending.