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Monday, May 23, 2022

Saudi Aramco expected to cut Aug contract prices for propane, butane from July

Saudi Aramco is likely to reduce its August Contract Price for both propane and butane by as much as $35/mt on the back of crude prices falling below $55/barrel, industry sources said Monday.

Other factors for the outlook include surplus barrels in the Middle East and relatively high freight costs.

Saudi Aramco is expected to release its August CP this week.

Industry sources expect the August CP for propane to be set at $350-$370/mt, while butane is expected at $380-$400/mt, with the spread between propane and butane holding steady at $30-$35/mt sources said.

On Monday afternoon, propane August CP swaps were pegged at $360.25/mt, and butane remained at a $34/mt premium to propane.

Market participants have shifted focus to September deliveries into North Asia as second-half August CFR North Asia was viewed as balanced.

“The delivered market for August appears balanced,” Brokerage Lorentzen and Stemoco said in its weekly report. “Even with fairly high stocks in Japan and Korea, supplies appear to be snapped up, perhaps as a reflection of fewer incoming US spot cargoes due to high freight rates and the closing of the [US-to-Asia] arbitrage.”

PRICES PRESSURED BY FREIGHT COSTS

In recent spot trades for FOB Arabian Gulf LPG cargoes, Abu Dhabi Gas Liquefaction Co. Ltd., or Adgas, has awarded its export tender for a 44,000-mt evenly split LPG cargo for August 19-21 loading to Petredec.

The price was a discount in the $10s/mt to Saudi Aramco’s August CPs for propane and butane, FOB.

One trader said this was a good price for the seller in view of the recent deep discounts estimated for CP-linked FOB cargoes seen around $30s/mt.

Qatar’s Tasweeq and Kuwait Petroleum Corp. recently sold cargoes based on the August Argus Far East Index minus the prevailing Baltic VLGC rates for the Persian Gulf-to-Japan route.

That was considered a short-term pricing solution to clear a surplus amid limited vessels and costly freight.

Last week, freight rates slipped to the low $120s/mt from mid-$130s/mt, as owners and charterers relet their ships, releasing more vessels for spot charter.

“FOB [Arabian Gulf] cargoes were still offered at double-digit discounts to August CP, but interest remained muted as participants were content to await the August CP due to be released next week,” the report added.

Saudi Aramco is expected to discuss term levels for August propane and butane loading cargoes later Monday, but this could not be confirmed. It could not be reached for comment.

Saudi Aramco’s July CPs for propane and butane were $395/mt and $425/mt, respectively.

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