By Mary Hogan, Michelle Kim, Alexander Borulev, Philip Reeder
MTBE markets globally will continue to be dominated through the second half of the year by the extent to which COVID-19 restrictions affect demand for gasoline, particularly during the key summer driving season in the northern hemisphere.
With lockdown measures easing in Europe amid a strong vaccine drive, MTBE market players were expecting increased consumption of road fuels and, thus, rising blending activity.
This year's driving season could be longer than normal as people use holidays carried over from 2020 to extend summer vacations.
Nevertheless, gasoline demand and gasoline blending activity will also be dependent on the vaccine rollout progress, and the potential introduction of so-called vaccine passports.
"It is difficult to say when exactly demand will pick up, but we are moving in that direction," a gasoline blender said.
On the supply side, the European MTBE market was heading into summer with participants holding product in tanks, according to sources, which will allow them to start blending as demand for gasoline picks up.
A source noted, however, that in the event of a really strong market it may become profitable to resell the material.
The sustainability of the 'V-shaped' recovery in the Asian MTBE market will also largely be reliant on the COVID-19 situation.
The FOB Singapore MTBE market reached a 19-month high of $759.50/mt on April 21, representing a return to pre-COVID-19 values, S&P Global Platts data showed.
Moving into H2, the rollout of vaccines regionally has contributed sentiment that MTBE prices will remain supported. The MTBE market "may be better, but it depends on the vaccine [rollout]," a trader said.
Indeed, the resurgence of COVID-19 cases in India and Japan from late April has clouded the prior upbeat sentiment in the MTBE market.
Meanwhile, lucrative MTBE gasoline blending margins and steady MTBE blending demand are likely to continue through the second half, according to market sources.
Data from major MTBE and gasoline importing countries in Asia have signaled strong expected recovery in demand. Persistent oversupply concerns in the gasoline blending market could limit any sustainable recovery, however.
Market expectations are for one of the major Qatari plants, which shut in November, to resume operations in the second half. Malaysia's PRefChem was also expected to restart its 750,000 mt/year MTBE plant, following operations coming offline in March 2020 due to a fire.
A recovering Chinese automotive sector has added to upbeat sentiment in the market. China's output of cars was recorded at 2.307 million units in March, up 65% year on year, while output of SUVs was up 76% at 2.291 million units, NBS data showed.
The US MTBE market was expected to see robust production levels moving into the second half of the year, driven by favorable production margins and as regional storage levels continue to be rebuilt following February's deep freeze and resulting slew of regional facility outages.
In addition, Indorama's Port Neches, Texas, facility was expected to come back online sometime in the second half, according to market sources, following an outage in early May that significantly tightened available spot supply of MTBE.
Market expectations are for MTBE to continue to be priced economically compared with other export octane-boosting gasoline blending components, such as reformate and alkylate, as a result of stable to stronger production.
Demand for reformate and alkylate in the US gasoline blending pool could also impact MTBE's competitiveness for export, with domestic gasoline demand from US summer driving season expected to be relatively strong as more of the population becomes vaccinated against COVID-19.
If MTBE's competitive price holds relative to other commonly exported octane-enhancing blending components, exports from the US Gulf to Latin America and Mexico could increase.
Lower anticipated refinery activity in Mexico was expected to add support for export volumes out of the US Gulf.
The rate at which economies in Latin America recover from COVID-19, largely hinging on the rate at which populations can be vaccinated, was expected to impact gasoline demand and export demand for MTBE as a result of blending activity.
