General index, Crude Oil Data

Global Market Analysis, 08 July 2022

This week's analysis comes from Europe with a Q2 overview of LPG markets.

By Arran Brodie and Virginia Bridgewater

The second quarter of 2022 saw price volatility reduce from that seen in Q1, as trading activity adjusted to a market without Russian origin product.

General Index, Naphtha Indexes

April saw the sharpest price movements over the second quarter of 2022. Propane NWE CIF Large Cargoes ranged $99.25/MT in the month, peaking on 4 April at $816.25/MT before slipping to a low of $717/MT on 25 April. The final days of April saw a steady recovery to the $760s/MT, however this would prove to be the price ceiling in the following months. Naphtha and butane both followed similar trends in April, with prices peaking and bottoming on the same days as propane. Over this time the propane-naphtha spread tightened by $1/MT to $-126.50/MT, meanwhile the butane-propane spread widened almost $40/MT to $-74.50/MT.  

The relative strength of butane at the time was caused by tight supply, due in part to the closure for maintenance of the Mongstad refinery, and an increase in demand as butane cracking was maximized in North West Europe. This saw bidding in the window climb from one bid in the whole of the first quarter of 2022 to three in a month, driving the butane percentage to naphtha up from 93% at the beginning of April to 100% at the end of the month. In the final week of April the propane-butane spread more than doubled to $-150.25/MT.  

General Index, Cracks to Crude

The price of propane plateaued in May, ranging $37.50, and finishing the month only $0.50/MT cheaper than it started, at $759/MT. Naphtha also remained relatively steady, finishing the month at $779.25/MT, a 1% fall from where it started. Butane large cargoes were unable to maintain their relative strength from the month before, with the ratio of butane to naphtha slipping to 95% by month end and the physical propane-butane spread also retreating to $-41.75/MT from highs of $-165.75/MT on the 13 May. On this same day the pronap widened to its peak for the quarter of $-174.50/MT.      

Whilst May saw LPG and Naphtha prices settle, Brent climbed $18/bbl, pushing back the cracks for all three products.  Propane and butane cracks fell 45% and 90% respectively, ending the month at -$59/bbl and $-55.25/bbl. Movements in the naphtha crack were much more extreme, collapsing 854% over the month, to finish at $-25.25/bbl. All three cracks continued to dip into June before reviving slightly in the second half of the month.

The big mover in June was butane, with the large cargo price tumbling 16%, ending the month at $674/MT, $127/MT cheaper than where it started. This saw the ratio of butane to naphtha fall to 85%, as a flurry of un-lifted offers in the physical butane window forced down prices. Thirteen offers in total were made during the window in June, from four parties; Gunvor, Total Energies, Ineos and Phillips 66. This equated to more than triple the total number of offers that had been made in the first five months of 2022.  

General Index, Butane Activity

Over the same period propane and naphtha prices both fell slightly, remaining relatively steady in comparison to butane. This led to the propane-butane spread flipping from negative to positive, ending the month at $38.75, up $94.25/MT from 1 June.

General Index, Propane Butane spread

EIA stats for the quarter showed a consistent rise in US LPG inventories, however as the quarter closed many of these builds were not as large as many expected. OilX data shows US refinery output rose each month in Q2, however total output in the quarter was down 29 KBD year-on-year. Meanwhile US LPG exports to North-West Europe reached a new high in June, breaching 1,000,000 MT, almost triple the previous high of 373,000 MT. This was following on from April and May where exports were at their second highest on record. Overall this means that Q2 2022 exports have risen 668,000 MT from 2021 and almost 1,500,000 MT from 2020.

General Index, Propane Activity

Equinor has seen production forecasts fall 50% this year, with lower production expected to continue into next year. This has led to them by far the most active buyers in the Propane NWE CIF Large Cargoes window, with 17 bids being placed between April and June. This is a major swing from Equinor, who have moved from net sellers in Q1 to a Q2 in which they placed no offers. BP and BASF were the next most active buyers, whilst Total Energies and Gunvor were seen offering the most cargoes last quarter.

Zulfadhli Kader
Arran Brodie, Energy Analyst
Zulfadhli Kader
Virginia Bridgewater, Pricing Director, LPG
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