European LPG market sentiment buoyed by tightness, higher January contract price

LONDON (ICIS)–Market sentiment in the Europe liquefied petroleum gas (LPG) spot market has been buoyed by continued tightness amid improved demand, coupled with company-contracted prices settling at substantially higher levels.

The Ras Tanura Aramco propane contract price increased from $440/tonne in December to $565/tonne in January, while the Bethouia Sonatrach propane contract for January settled at $467/tonne as against $405/tonne in December.

The spike substantiates the tightness in the LPG market amid growing demand.

In the spot space, propane barge values firmed considerably with the continued tightness observed since the start of December last year. Butane barges followed suit.

Both the propane and butane barge markets begin the new year slightly tight, with stocks low after destocking activities at the end of 2019.

Increases for both propane and butane barge values were particularly evident in the Mediterranean belt as Asia still continues to attract a lot of material.

Similar spikes were seen in propane free on board (FOB) Seagoing and FOB Amsterdam-Rotterdam-Antwerp (ARA) barge quotations, with butane barges staying firm in Seagoing terms although weakening marginally in the ARA region.

At the same time, no major logistical issues were reported on the Rhine river. Limited activity was recorded in the butane large (3,000+tonne) cargo market in the first week of January.

The market is largely balanced with butane values as a percentage of naphtha firming further to 89-90% in the first week of January.

The upward pull has been largely supported by naphtha values gaining on the back of $2.50-3/bbl rise in the upstream crude futures following increased tensions between the US and Iran.

The propane-naphtha spread widened slightly to -$73/tonne, with fluctuating crude values impacting the spread last week.

Continued tightness in the propane cargo market has been supporting the upswing in cargo values.

The propane cargo market has seen a surge in demand, with players in the heating industry attempting to cover supply shortness following refinery shutdowns during the holiday period in Europe.

Outright prices for propane cargoes have surged by $15-25/tonne and butane cargoes have gained by as much as $60/tonne from two weeks prior.

As of now, the market remains illiquid. It is expected to return to business fully by mid-January which may provide a clearer direction of prices.

(Photo by Tomek Muranski/EPA/Shutterstock )