European propane paper rebounded on Wednesday morning as renewed security incidents near the Strait of Hormuz continue to threaten global LPG supply chains.
Early on Wednesday, two vessels operating near the strait were reportedly attacked — a reminder of the conflict's impacts on the markets even though Washington offered reinsurance earlier this week that it would end soon.
Northwest European propane paper for April was trading around $625/t on Wednesday morning, about $17/t higher than at the close on Tuesday, 10 March, recovering some of the steep losses recorded in the previous session. The paper market shed 7-8pc, or roughly $50–60/t on 10 March, tracking a decline in crude futures values, after US president Donald Trump suggested the US-Iran war could end sooner than expected.
The equivalent Asia-Pacific propane paper contract was up by $24/t in early Wednesday trading to around $703/t, after dropping by about $55/t by Tuesday's close.
Prompt global LPG markets are gripping with extreme volatility. European buyers do not rely on Iranian LPG supply, but the conflict in the Middle East and the de-facto closure of the strait of Hormuz is threatening to disrupt close to 30pc of global seaborne LPG exports. Any prolonged disruption will tighten global supplies and force buyers to raise bids to secure the remaining available cargoes. Each day that the strait remains closed holds up around 100,000t or more of LPG supply from the global market.
In Europe, prompt bids and overall discussions for large cargoes appear to be shifting toward April dates, as there is too much uncertainty for March. This is reflected in the March-April paper backwardation, which is hovering around $90/t, one of the steepest gap in fourteen years. The last time the spread was near $100/t was in March 2012, when the Eurozone was grappling with a debt crisis.
