The start of higher RVP season at the beginning of this week also allows blenders to use more of cheap butane in their gasoline blending process.   This is a much welcomed opportunity for Northeast gasoline blenders, who have faced limited opportunity to blend for most part of this year due to expensive gasoline components.   
However, the blending window is expected to close soon in the near term, mainly due to a steep gasoline price backwardation and a relatively flat naphtha price forward curve.   “You can think of blend margins kind of like an arbitrage value. It doesn’t usually stay persistently open, because people blending to capture a good margin tends to narrow the margin over time,” a source said.   “Timing depends on how weak naphtha gets and the supply of high octane blending components to actually blend the naphtha,” he added.   
Naphtha values have fallen sharply in tandem with weaker prices in Asia. Asian naphtha demand is seen lower because of a lower petrochemical demand.   The key to the near-term blending economics is the price curves of gasoline and naphtha, traders said.   RBOB gasoline price curve shows a backwardation of about 1.5cts/gal for December-January and 50pts/gal for January-February. Comparatively, naphtha price curve in Europe is almost flat.   While RBOB gasoline gets cheaper over the next month, naphtha does not. The forward price disparity should dampen the favorable blending economics.   
Traders track the European naphtha prices because the Northeast depends on naphtha imports from Europe, but Gulf Coast blenders have easier access to naphtha supplies from local refiners.    Besides forward price curves, the rather expensive gasoline blendstocks, including alkylates, should keep the favorable gasoline blending volumes in check, traders said.   
“The high octane blending components have been stronger and less available so not everyone can capture the blend margins,” a second source said.   Meanwhile, at least three major trading oil companies have reduced their tank space in the New York Harbor significantly, allowing some smaller or opportunistic players to expand their storage tank capacities. The storage subletting activity seems to be centered at IMTT products terminal at Bayonne, N.J.   
This allows these smaller players to blend more gasoline when the economics work. This could also potentially mean more new players and/or more trading activity.