Enterprise Products Partners, operator of an 835,000 b/d LPG export terminal on the Houston Ship Channel, is buying back its own August-loading cargoes as higher US propane prices narrowed the arbitrage to Asia and led to lower prices for cargoes on a spot fob basis.
The move is unusual for a terminal operator, as a narrower arbitrage would normally lead term buyers, mainly traders, to cancel or defer loadings, and marks the first time market participants have seen Enterprise active in the spot cargo market. So far at least two, and possibly more, cargoes have been repurchased, according to market participants.
Enterprise declined to give further details.
The move by the area's largest terminal operator is expected to tighten availability of cargoes out of the US and bolstered sentiment in the global market this week. Delivered propane prices on the Argus Far East Index rose to $690.50/metric tonne yesterday, the highest levels since early January.
Argus assessed spot fob prices for propane cargoes out of the US Gulf coast at 4¢/USG yesterday, at cancellation-level economics, as at least two Gulf coast cargoes have been cancelled for end-July and early August loading and as the August LST/FEI spread dipped below $100/t on paper earlier this week.
The motivations for a US shipper to buy back August loadings remain unclear, but market participants point to a wide propane-ethane spread that has made loading low-ethane propane cargoes — with only 2pc ethane content versus the 5pc allowed for HD-5 quality shipments — more costly.
Enterprise prompt-month in-well propane at Mont Belvieu, Texas, was assessed at an 81.8¢/USG ($357/t) premium to ethane yesterday, the widest differential in cents per gallon seen between the feedstocks seen since October 2014.
