July Pricing Analysis - European LPG

SUMMARY: European propane and butane firmed in July as the July 7 Strait of Hormuz re-closure, following the collapsed US-Iran ceasefire, pulled Middle East Gulf export capacity from the global seaborne pool for the second time this year. Propane averaged $540.65/mt and butane $579.77/mt, both roughly flat MoM, but each closed 5-13% higher than it opened, rallying through W4 (20–24 Jul) before fading in W5 as record US Gulf Coast exports (~2.9mn b/d) and a reopened Asia arb cushioned the shortfall. Propane underperformed both naphtha and butane: the prop-naphtha spread widened to −$203.51/mt as crackers shifted feed slate toward propane, while global C4tightness blew the prop-butane spread out to −$91.75/mt by month-end. The forward curve confirmed the move was near-term, bull steepening as M1 gained$25.50/mt while M12 softened $4.00/mt, and the East-West spread flipped back toa $102.02/mt Far East premium as Asian buyers sourced around the Gulf shortfall. Volatility told the more surprising story: CV hit six-month lows on both legs despite the active disruption, consistent with a market grown accustomed to repeated Hormuz cycles. A persistent closure past August would likely reprice the soft M12 and revive volatility.

Price Action

• Propane CIF NWE averaged $540.65/mt in July vs $547.63/mt in June (−1.3% MoM avg), closing the month +5.5% MoM; YoY +19.3%. High $593.00/mt (23-Jul), low $485.25/mt (01-Jul),range $107.75.
• Butane CIF NWE averaged $579.77/mt (−0.75% MoM avg), closing +13.1% MoM; YoY +27.0%. High$653.50/mt (23-Jul), low $520.50/mt (02-Jul), range $133.00.
• Both markets bottomed in the first sessions of July, then rallied through W4 (20–24 Jul, propane’s strongest week at $568.85 avg, including the $593.00 monthly high on 23-Jul),as the Strait of Hormuz re-closure on July 7 pulled Middle East Gulf export capacity out of the global seaborne pool for the second time this year.
• Butane’s weekly path moved harder than propane’s: W4 butane averaged $619.60 (+7.78% WoW) vs propane’s +4.13%, consistent with the C4 tightness pulling butane firmer relative to propane through the month.
• W5 (27–31 Jul) pulled back, propane −5.63% and butane −3.99%, as US Gulf Coast exports hit a record~2.9mn b/d and the Asia arbitrage reopened, cushioning the shortfall with substitute barrels.
• The flat monthly averages mask the intra-month swing: propane’s $107.75 range and butane’s$133.00 range both point to a rally-then-fade shape, consistent with the market treating the re-closure as a shock to absorb rather than a structural repricing.
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Cross-Market Dynamics

• Prop-naphtha spread widened from −$138.10/mt (Jun avg) to −$203.51/mt (Jul avg), −$65.41/mt MoM, as European steam crackers shifted more feeds late toward propane on the widening price advantage; naphtha itself firmed on cracker restarts and gasoline blenders competing for the same barrels, tightening the naphtha pool faster than propane’s petrochemical demand could absorb.
• Prop-butane spread widened from −$36.56/mt (Jun avg) to −$39.12/mt (Jul avg), but the month-end read is the sharper story: −$6.25/mt on 03-Jul blew out to −$91.75/mt by 31-Julas global C4 tightness (expanding C4/C3 spreads ahead of stronger August export programs) pulled butane firmer relative to propane through the month.

Cross-Regional Dynamics

• East-West spread(GX0000888) flipped from −$78.74/mt in June (inverted, Far East at a discount to Middle East) to +$102.02/mt in July, a $180.76/mt swing, as the normal Far East import premium reasserted itself.
• With Middle East Gulf export capacity constrained by the July 7 re-closure, Asian buyers, led by China (LPG imports rising to ~1.4mn b/d in July, near pre-conflict highs),sourced replacement barrels from the US Gulf Coast and the Panama arb rather than the Gulf, firming Far East CFR relative to Middle East CP.
• Mont Belvieu averaged−7.3% MoM, underperforming both the NWE and Far East benchmarks, consistent with record volumes leaving the US Gulf Coast rather than building domestic length.

Curve Structure

• Bull steepening: M1gained $25.50/mt (+5.21%) through July to $515.25/mt, while M12 fell $4.00/mt(−0.90%) to $439.50/mt; M2 (+4.51%) and M6 (+1.73%) also rose, with a clear front-loaded gradient.
• M1-M6 flipped from a marginal contango (−$0.50/mt) at month-start to a $16.50/mt backwardation by month-end, confirming the Hormuz-driven tightness is being priced as a near-term shock rather than a structural repricing.
• M1-M12 backwardation widened from $46.25/mt to $75.75/mt (+$29.50), consistent with the market pricing acute prompt scarcity against an assumption of eventual normalization within the year.
• Physical vs swap diff moved in the same direction, from a $6.00/mt discount to a $0.75/mt premium, corroborating the front-end tightening seen in the swap curve.
• The softening M12 is the pattern-shift trigger: if the Hormuz closure persists past August, expect the back end to start repricing higher too, shifting the pattern from bull steepening toward back repricing.

Price Volatility

• July CV was the lowest of the six-month run for both products (propane 4.49%, butane 5.78%),even against the backdrop of the July 7 Hormuz re-closure.
• The compression, rather than a spike, suggests the market has grown accustomed to repeated Hormuz open/close cycles this year and is pricing the disruption with less day-to-day reaction than the acute Feb-Apr period, when both legs read into double digits.
• Risk models still calibrated to the March-April regime (CV up to 16.88%) are likely overstating current position risk; July’s range points to a steadier, if structurally elevated, price floor.

Something To Watch

• Hormuz transit status as the binary catalyst:
  
  • Observation: the Strait has been effectively closed to commercial shipping since July 7following the ceasefire collapse.
  • Why it matters: a confirmed reopening would likely reverse the rally-then-fade pattern seen this month into a fuller retracement, given the June precedent; continued closure into August risks a fresh leg higher if US Gulf Coast supply cannot keep scaling.
  • What to monitor: weekly prop-butane close; US butane export loading data.
• Prop-butane spread as the C4 tightness signal:
  
  • Observation: spread at −$91.75/mt month-end, from −$6.25/mt three weeks earlier.
  • Why it matters: continued widening would confirm a structural butane premium into blending season; a snapback toward parity would signal the C4 tightness was transient.
  • What to monitor: weekly prop-butane close; US butane export loading data.
• M12 softness as the pattern-shift trigger:
  
  • Observation: M12 swap fell $4.00/mt (−0.90%) even as the front rallied.
  • Why it matters: sustained M12 softness confirms the market still expects normalization within the year; a reversal higher would flip the pattern from bull steepening toward back repricing and signal the market now sees the disruption as structural.
  • What to monitor: weekly M12 close; any extension of the Hormuz closure past the August window.

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.