Europe propane backwardated in fourth quarter on tight supply

28 September 2012 15:49  [Source: ICIS news]

LONDON (ICIS)--European propane values are backwardated throughout the fourth quarter as a result of current tight market conditions, sources said on Friday.

Spot propane cargoes were trading at robust levels of $1,000-1,005/tonne (€770-774/tonne) CIF (cost insurance freight) NWE (northwest Europe) according to sources.

Values are at elevated levels as a result of limited supply following the refinery maintenance season. Furthermore, a strong Asian market has exerted upwards pressure on European values.

“There’s a $6/tonne backwardation between October and November, and $3-4/tonne backwardation between November and December,” one source said.

“It’s very unusual as we usually see a $20/tonne contango in the fourth quarter,” the source added.

Backwardation is when current prices are higher than those for future months while contango means the opposite.

Demand for propane usually increases in the fourth quarter as it is used for heating.

“This is not healthy for the European market. People are not storing product because of the backwardation. If there is a cold snap it could send prices even higher,” the source said.

($1 = €0.77)

By: Sarah Trinder
+44 20 8652 3214

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