Summary
Propane flat price contracts took a significantly bearish turn at the start of the fortnight ending 22 Oct as the geopolitical risk premia from the regional escalation of tensions in the Middle East waned. The Nov’24 Mont Belvieu TET (Energy Transfer) propane (C3 LST) saw bearishness into the fortnight due to a larger-than-expected build of 3.4mb on 17 Oct (for the week ending 11 Oct). However, the following week’s draw flipped sentiment in US propane, with the Nov’24 C3 LST rising to 76.50c/gal on 23 Oct (at the time of writing).
In the East, the Far Eastern propane Index (C3 FEI) witnessed weaker price movements over the past fortnight, with the contract noting increasingly bearish pressure amid the volatility in crude, low Baltic freight and offers in the physical. The Nov’24 LST/FEI propane arb strengthened amid C3 FEI’s weakness, climbing up to -$235/mt on 23 Oct (at the time of writing).
The front-month differential between C3 FEI and NWE propane (C3 NWE), the propane East/West, fell from above $70/mt on 16 Oct to $65/mt at the time of writing. Similarly, the Nov’24 differential between C3 FEI and Saudi Aramco propane (C3 CP) dropped from above $30/mt on 16 Oct to $23.50/mt at the time of writing. This FEI/CP weakness may have been worsened by a softer BLPG1 freight (from the Middle East to Asia), with the M1 freight falling from $66/mt on 09 Oct to $53/mt on 22 Oct.
The market will now be awaiting the Nov’24 CP propane and butane OSPs – due to be announced at the end of October for a more concrete view of CP sentiment into the new month. Still, India’s appetite for oil products is expected to grow into Q4’24 amid the country’s upcoming festival season and post-monsoon agricultural season, which may support sentiment for CP LPG.
US n-butane (Enterprise Butane, or, C4 ENT) dropped from 2.875c/gal on 16 Oct to 1.375c/gal on 21 Oct, where it found support and climbed to 2c/gal on 23 Oct (at the time of writing).
