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NWE propane extends unseasonable premium over butane

19 Jun 2017, 1.03 pm GMT

NWE propane extends unseasonable premium over butane

London, 19 June (Argus) — Disparity between propane and butane large cargo assessments for LPG delivered into the Amsterdam-Rotterdam-Antwerp (ARA) trading hub has widened to an unseasonable $36.5/t propane premium at last week's close, from $21/t in June.

Falling crude prices have seen both grades shed value since the turn of the month along with the wider oil product market spectrum. But butane value cif ARA decreased by some $35.5/t since 31 May, closing last week assessed at $308.5/t, while propane is down a considerably more marginal $14.5/t to $345/t.

Propane has resisted greater falls because of the continued large cargo demand from trading firms Gunvor and Petredec, as well as oil major BP and petrochemical firm Dow.

Supply has failed to match the steady demand at times in June, allowing physical propane value to outperform the regional benchmark crude assessment, and forward propane paper markets as well as its butane counterpart.

Propane cif ARA firmed by over 5pc since 31 May against North Sea Dated crude and is currently assessed north of parity at 100.4pc.

Against the front month propane swap assessment, physical value cif ARA has stood a premium every trading day since 1 June. The disparity, currently assessed at +$6/t, stretched as far as +$10/t across 8-9 June.

In stark contrast, public discussions of large cargo butane trading have been muted since 31 May. This has left butane cargo prices subject to falls in value of the competing petrochemical feedstock naphtha, against which it is often priced on a relative basis.

More recently prices also began to slide, albeit marginally, against naphtha. Butane cargoes, assessed at 80pc of the heavier feed since mid-May, are currently indicated at 78pc as a distinct lack of buyers in the market trimmed estimations of relative value.

The divergence in open discussions of trading have accordingly resulted in a marked difference in traded volumes. Six large cargo propane deals have been concluded publicly in June amounting to 123,000t of product changing hands. Muted dialogue across the butane market has seen no trades struck in the public eye.

The $36.5/t propane-butane spread at last week's close marks a $39.5/t turnaround from last year when butane conversely stood at a slim $3/t premium. The propane-butane spread has been in negative territory on 16 June for the last five years, averaging -$16.6/t.

The spread is important for petrochemical firms determining steam cracker feedstock choices which are additionally constrained by the crackers level of flexibility, and how the different product yields fit with downstream petrochemical requirements at that time.


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