Qatar Petroleum accepts Feb term LPG nominations without cuts, delays: traders
Qatar Petroleum announced acceptances of February-loading term LPG cargo in line with lifters’ nominations without cuts, delays, advanced loadings, or changes to tolerance volumes, traders said.
These come as demand in North Asia was supported by a cold winter that is expected to last through January for residential heating, as well as Chinese and South Korean propane dehydrogenation plants maintaining high operating rates, sending CFR propane prices to the highest in two years and three months.
The market was indicated lower early Dec. 5, as healthy North Asian demand is expected to be met by comfortable supply from the US and Middle East in January, while spot demand from India for early in the year has yet to reemerge.
Front month February Saudi CP propane swap was indicated early Jan. 5 at 571/mt, according to brokers, down from $594/mt valued the previous session.
Amid the cold winter, Saudi Aramco in the week ended Jan. 2 set January propane term contract price at $550/mt, up $100/mt from December, and butane CP at $530/mt, up $70/mt. These were within or above traders’ expectations, with the propane CP rising for the seventh-straight month and butane up for the sixth month in a row.
A Chinese trade source said while propane demand from PDH plants was healthy, the high January CPs were “eroding PDH margins.”
EMERGENCY EXPECTED FOR TOKYO
A Japanese trader said the run-up in CFR Asian prices could be due to Chinese importers buying before the new year holidays, “so, relatively, H1 Feb is strong, and H2 Feb is relatively weak.”
Front-cycle CFR North Asia H1 February delivery propane was assessed Jan. 4 at $674/mt, the highest since hitting $683.5/mt on Oct. 2, 2018, S&P Global Platts data showed.
CFR North Asia H2 February delivery propane was assessed at $664/mt Jan. 4.
The trader said the weather forecast for Japan was for heavy low depression for the coming weekend “and then, snow will be more and continue such situation through January.”
While this will stoke demand for heating, he noted that the Japanese government will issue a state of emergency around Tokyo area.
“I am not sure if such incident will affect LPG demand,” he said.
The government is set to declare a state of emergency for the second time in the coronavirus pandemic, probably as soon as Jan. 7 to battle surging cases in the Tokyo area, Nikkei Asia reported.
The emergency would cover the capital as well as the neighboring prefectures of Kanagawa, Saitama as well as Chiba and is expected to last about a month, the newspaper said. Japan’s first state of emergency was declared April 7 in 2020 and lasted through late May.
QP had also announced acceptances of January and December-loading term LPG cargoes without cuts, delays, or advanced loadings.
Traders said overall supply from the Middle East to Asia in January is also expected to be high at around 2.7 million mt, while revised arrivals from the US in January are estimated at 3.2 million mt, up from initial expectations of 2.9 million mt and above 2.7 million mt for December arrivals.
These expectations come as the majority of OPEC+ members were reportedly in favor of maintaining the January production quotas into February, but were unable to dissuade Russia from its position that the coalition should raise crude production by 500,000 b/d in the month to reclaim market share lost to the pandemic and citing recovering demand.
But with Saudi Arabia favoring maintaining the January quotas, market participants remained optimistic that OPEC+ will ultimately leave production unchanged in February.
ADNOC is due to announce acceptances of February-loading nominations early in the week starting Jan. 10, followed by Saudi Aramco week after that.