Asia Butane Cargoes Regain Premium Over Propane Amid Mideast Supply Concerns
Physical butane cargoes in Asia have regained a premium over propane as renewed U.S.-Iran tensions revived concerns over Middle East supply, according to trade sources.
Following the June peace deal, physical butane cargoes briefly traded at parity with propane on expectations that the return of Middle East mixed cargoes would improve butane availability in Asia, eroding the premium, OPIS reported earlier.
However, after U.S. President Donald Trump declared the ceasefire with Iran over last Wednesday, uncertainty surrounding Middle East LPG supply resurfaced. OPIS assessments showed the physical butane premium over propane rebounded to $10 per metric ton last Friday before widening to $15/mt on Tuesday. Brokers said the premium remained at $15/mt as of Thursday.
“Market participants are pricing in a premium for butane again as fewer Middle East cargoes would leave Asia increasingly reliant on U.S. and Canadian cargoes, which are predominantly propane-rich, tightening regional butane availability,” one trader said.
The tighter supply outlook is already reflected in the spot market. South Korea’s E1 and Hanwha TotalEnergies Petrochemical or HTC were both heard to have left spot butane buy tenders unawarded due to a lack of offers, sources said.
E1’s tender, which closed last Thursday, originally sought a 23,000 mt butane cargo for second-half August or H1 September delivery into Yeosu on a DES basis. However, the company purchased a 44,000 mt mixed LPG cargo instead.
Similarly, HTC’s tender, which closed Wednesday, was heard unawarded after seeking a 23,000 mt butane cargo for Aug. 1-31 delivery into Daesan on a CFR basis.
However, some market participants noted that the increase in the butane premium could be limited if U.S. exporters shift back toward marketing more mixed cargoes, a strategy adopted during the height of the U.S.-Iran conflict to better serve demand from India.
Vortexa data shows U.S. exports of mixed 2:2 LPG cargoes to Asia rose to 7,400 mt in March following the outbreak of the conflict in late February, up from none the previous month. Volumes continued increasing to 59,400 mt in June.
August exports are currently estimated at 263,600 mt, with most cargoes destined for India and Indonesia, compared with none in July, the data shows.
The CFR Japan propane and butane flat prices were assessed at $697.25/mt and $731.50/mt, respectively, according to OPIS assessments.
—Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong mwong@opisnet.com