US butane, C5 to tighten: BofA

OREANDA-NEWS. November 09, 2015. US butane and natural gasoline markets are poised to tighten in 2016 amid strong growth in global gasoline demand, according to BofA Merrill Lynch analysts.

In contrast, prices for ethane and propane will remain weak, as both liquids remain oversupplied next year, they wrote.

"Ethane and propane are largely a petrochemical feedstock and expanding cracking capacity takes years," according to the note. "Thus, we see little scope for ethane to break away from natural gas prices, or for propane to rally relative to crude oil prices in 2016. In contrast, we see tightness in 2016 for the heavier NGLs, butane and natural gasoline, which are mainly used as gasoline blend stock, on strong growth in global gasoline demand."

Overall NGL prices are weaker this year relative to last due to oversupply. Yesterday butane prices stood at 66.5?/USG, down from 109.25?/USG a year ago. Propane prices are down from 86.625?/USG in November 2014 to 45.5?/USG yesterday, according to Argus data.

The report calls for the 2016 spread between propane and butane to rise as butane supplies tighten.