Saudi Aramco Raises September LPG CP Amid Renewed US-Iran Strikes
Saudi Aramco has raised its September LPG contract price amid fresh strikes between the U.S. and Iran that have deepened supply uncertainties in the market.
Military action by the U.S. over the weekend came shortly after Washington announced a campaign to economically isolate Iran and unveiled expanded sanctions against the country.
The September CP was set at $625 per metric ton for propane and $660/mt for butane – up $5/mt and $20/mt, respectively, from August levels. The spread between propane and butane widened to minus $35/mt, compared to minus $20/mt for August contract prices, reflecting persistent tightness in butane volumes relative to propane.
Market participants were unsurprised by the increase, noting that the supply of Middle East cargoes has remained tight amid continued regional tensions. Vortexa data shows that since the war started in February, Middle East exports to Asia have plunged from around 4 million mt per month, with subsequent monthly volumes not surpassing 1.5 million mt.
Middle East flows to Asia in August are estimated at 1.17 million mt, down from 1.24 million mt in July.
Asia LPG Supply Options Narrow Amid Renewed Strikes
Analysts noted that the renewed strikes come at a time when Asia’s LPG buyers already face reduced supply options, with both Middle East and U.S. flows facing disruptions.
Middle East export alternatives to the Strait of Hormuz, such as Aramco’s Yanbu terminal, have faced Houthi attacks, with volumes from the terminal declining. Exports from the terminal to Asia dropped to 240,300 mt in July from 302,600 mt in June, before falling further to 71,200 mt in August, with September volumes estimated at only 51,700 mt, Vortexa data shows.
U.S.-Asia shipments have also faced soaring Panama Canal fees since August, weighing on the arbitrage and potentially disrupting American flows into the region. Vortexa data shows U.S.-Asia flows at 4.21 million mt in August, down from 4.86 million mt in July. September volumes are estimated to fall further to 3.55 million mt, the same data shows.
“News of Iran and Oman negotiating a framework to establish a temporary shipping corridor through Hormuz gave some hope in the market that flows could normalize, but renewed strikes set us back to square one,” one trader noted.
Market Likely to be Quiet For Now
Looking ahead, market participants expect buyers to retreat to the sidelines once again, taking a wait-and-see approach before re-entering the market.
“Buyers need clarity on how the strikes will unfold before stepping back into the market. Prices are likely to rise sharply and become volatile amid bullish sentiment, further discouraging buying activity,” one trader said.
The September and October propane Far East swaps jumped to $775/mt and $738/mt, respectively, on Monday, up $15/mt and $16/mt from last Friday.
—Reporting by Chek Hoe Tan, chekhoe.tan@dowjones.com and Cheryl Lee, cheryl.lee@dowjones.com; Editing by Mei-Hwen Wong, mei-hwen.wong@dowjones.com