European Physical Propane Price Rallies to Three-Year High on Middle East Conflict

The OPIS assessed CIF Amsterdam-Rotterdam-Antwerp (ARA) physical propane price for March has climbed $101.50/metric ton over the past two days to reach its highest level since March 2023.

The OPIS CIF ARA propane rate closed at $701.50/mt on Tuesday, rising $61.50/mt day on day, as well as holding $135.50/mt higher on the week. That’s the highest level since March 3, 2023, according to OPIS pricing data.

Global liquefied petroleum gas (LPG) prices have rocketed on the conflict involving the U.S., Israel and Iran, with market uncertainty rippling across all product and shipping sectors.

The war risk premiums associated with this uncertainty has buoyed Far East and Northwest European swaps, helping to widen the spread to LPG prices at Mont Belvieu in the U.S. The propane/naphtha pricing spread has also narrowed significantly in recent days. The front-month pairing closed at minus $3/mt on Tuesday having closed February at -$27/mt, OPIS data showed. The pairing has been narrowing since early February, having peaked at -$64/mt on Feb. 4.

OPIS understands it is too marginal for cracking propane once the pairing narrows beyond minus $30/mt. Looking at the month ahead, the propane/naphtha spread closed at -$66/mt on Tuesday, slightly narrower than -$73/mt on Monday.

The arbitrages were first boosted at the end of February following the partial collapse of a structure carrying propane and butane pipelines at the Juaymah NGL facility in the port of Ras Tanura, Saudi Arabia.

The arbitrage between the OPIS Mont Belvieu Enterprise (Non-TET) and Far East propane month ahead assessment closed at $305/mt on Tuesday, its highest level since $310/mt on Oct. 1, 2024. Meanwhile, the May spread traded at $244/mt on Tuesday, up from $222/mt on Monday.

On the trans-Atlantic route, the propane arbitrage between the Mont Belvieu Enterprise (Non-TET) and Northwest Europe for March widened to $301/mt on Tuesday, up from $252/mt a day earlier. The front-month spread is currently at its highest level for at least 27 months.

Even before the start of the conflict in the Middle east, the more profitable propane arbitrage between the U.S. Gulf and East Asia tightened trans-Atlantic flows, with expected imports stagnating for Northwest European delivery.

As of March 4, there was 230,000 mt of LPG onboard Handysize carriers and larger vessels for delivery into Northwest Europe in March, data from shipping analytics firm Vortexa showed. An additional 68,000 mt of LPG has already been discharged in Antwerp this month. Northwest Europe imported 530,000 mt of LPG in February.

While Northwest European deliveries have suffered, flows to the Mediterranean have held firm, buoyed by demand from Ramadan, particularly for butane.

The Mediterranean imported 652,000 mt of LPG in February, with a total of 571,000 mt for March to date either en route or already been discharged in the region.

Reporting by Jamie Aldridge, jaldridge@opisnet.com