Thursday, January 23, 2020
(January 23, 2020) — Prices for spot propane cargos on the U.S. Gulf Coast hit 68-month highs in late December 2019 amid weak Mont Belvieu prices and softer freight rates, reports S&P Global Platts. Free onboard propane cargos for loading 30 to 45 days forward spiked to a 30-cent/gal. premium over cavern product. The last time the propane cargo premium was higher was in April 2014 at 30.50 cents/gal.
For much of December spot cargo propane averaged a 17.08 cents/gal. premium to cavern product, more than double the November average of 7.92 cents/gal. and the five-year average of 6.02 cents/gal. One of the reasons behind the recent spot cargo strength was low Mont Belvieu prices, which declined nearly 13 cents since the start of December on the back of wide-open arbitrages. By the end of the month, the arbitrage from Houston to Asia was open on paper to the tune of $80.62 a metric ton (MT), a record high, and at $45.65/MT from Houston to Europe, S&P Global Platts data showed.
December non-LST propane, reflecting barrels at the Enterprise Products storage and fractionation center in Mont Belvieu, traded at 42.875 cents/gal., down from the previous close of 44.50 cents/gal. “Cavern propane is low because we’re already at maximum export capacity at the docks,” said S&P Global Platts Analytics’ Andrew Neal. “So excess product is pricing into domestic demand.” Additionally, sources attributed high cargo premiums to strong Asia prices and Middle East supply tightness. “Demand is steady in Asia and Europe as Saudi Arabia has cut output, including LPG,” said one source. “The alternative supply source is the U.S.”
Meanwhile, very large gas carrier (VLGC) freight rates have continued to fall as more vessels return to service following retrofits to meet new International Maritime Organization low-sulfur bunker-fuel regulations. The rate for the Houston-to-Japan route remained unchanged at a three-month low of $115/MT while the Houston-to-Europe route fell to $65/MT. Houston-Japan VLGC rates had averaged $118.89/MT in December, compared with $129/MT in November. Houston-Europe rates fell $6.27/MT to $68.26/MT in the same period.
Data from the Energy Information Administration showed a 2.56-MMbbl draw on primary U.S. propane inventories the week ended Dec. 20 that brought stocks down to 88.4 MMbbl. That outpaced market expectations of a 2.4-MMbbl decline. Despite market talk of maxed-out exports, EIA reported total U.S. exports fell 196,000 bbld week on week to a monthly low of 1.03 MMbbld. Platts data showed 21 LPG carriers, including 12 VLGCs, were loaded at U.S. ports that week.
Sources were unclear on the reasons behind the downturn in exports, with one trader noting, “If anything, they should be flat, so it could just be ship timing.” Another shipping source commented that there were closures on the Sabine-Neches Waterway due to fog. The waterway was closed for 33 hours Dec. 15-17, sources told S&P Global Platts.
(SOURCE: The Weekly Propane Newsletter, available by subscription)
For much of December spot cargo propane averaged a 17.08 cents/gal. premium to cavern product, more than double the November average of 7.92 cents/gal. and the five-year average of 6.02 cents/gal. One of the reasons behind the recent spot cargo strength was low Mont Belvieu prices, which declined nearly 13 cents since the start of December on the back of wide-open arbitrages. By the end of the month, the arbitrage from Houston to Asia was open on paper to the tune of $80.62 a metric ton (MT), a record high, and at $45.65/MT from Houston to Europe, S&P Global Platts data showed.
December non-LST propane, reflecting barrels at the Enterprise Products storage and fractionation center in Mont Belvieu, traded at 42.875 cents/gal., down from the previous close of 44.50 cents/gal. “Cavern propane is low because we’re already at maximum export capacity at the docks,” said S&P Global Platts Analytics’ Andrew Neal. “So excess product is pricing into domestic demand.” Additionally, sources attributed high cargo premiums to strong Asia prices and Middle East supply tightness. “Demand is steady in Asia and Europe as Saudi Arabia has cut output, including LPG,” said one source. “The alternative supply source is the U.S.”
Meanwhile, very large gas carrier (VLGC) freight rates have continued to fall as more vessels return to service following retrofits to meet new International Maritime Organization low-sulfur bunker-fuel regulations. The rate for the Houston-to-Japan route remained unchanged at a three-month low of $115/MT while the Houston-to-Europe route fell to $65/MT. Houston-Japan VLGC rates had averaged $118.89/MT in December, compared with $129/MT in November. Houston-Europe rates fell $6.27/MT to $68.26/MT in the same period.
Data from the Energy Information Administration showed a 2.56-MMbbl draw on primary U.S. propane inventories the week ended Dec. 20 that brought stocks down to 88.4 MMbbl. That outpaced market expectations of a 2.4-MMbbl decline. Despite market talk of maxed-out exports, EIA reported total U.S. exports fell 196,000 bbld week on week to a monthly low of 1.03 MMbbld. Platts data showed 21 LPG carriers, including 12 VLGCs, were loaded at U.S. ports that week.
Sources were unclear on the reasons behind the downturn in exports, with one trader noting, “If anything, they should be flat, so it could just be ship timing.” Another shipping source commented that there were closures on the Sabine-Neches Waterway due to fog. The waterway was closed for 33 hours Dec. 15-17, sources told S&P Global Platts.
(SOURCE: The Weekly Propane Newsletter, available by subscription)
