ARA-Brest discount sends propane east

: LPG
20/07/16

Traders in eastern Europe are turning to the Amsterdam-Rotterdam-Antwerp (ARA) market for propane supply because of a significant discount there to prices daf Brest, the eastern European LPG pricing and trading hub at the Poland-Belarus border.

Tight daf Brest supply and a surge in ARA imports has seen the cif ARA large cargo-daf Brest discount average $95/t this month, comfortably past the threshold of -$80/t, where buying product from ARA becomes competitive with geographically-closer Brest.

A trader sold a block train of 750t fca to Poland and 750t fca to the Czech Republic on 13 July. The same trader reported selling near 2,000t of product to the latter country so far this month, a significant rise on the total 900 t/month of Belgian and Dutch exports to Czech Republic during summer 2019.

Other terminal operators in the ARA hub report sustained enquires from, and sales to, Poland.

Eastern Europe is typically supplied with propane from Russia, either through Poland's Baltic ports or the rail terminals at Brest. But Russian LPG output slumped to a five-year low in May and June because of Opec+ crude production cut obligations and planned maintenance at several refineries, and this raised prices at Brest making ARA an increasingly economically-attractive option for traders.

Exacerbating this, ARA prices are suppressed by a near-record 500,000t of propane arriving from the US this month.

Demand for eastern trade from ARA will continue as long as pricing at the hub remains under pressure and Russian supply is tight, which is anticipated at least to the end of this month on both counts. In August, US imports to northwest Europe may wane to a more regular 275,000-325,000t range, leaving the market well-supplied but not under the acute pressure seen this month.

Russian oil output is likely to rise to 9mn b/d in August from 8.49mn b/d in May-July, as Opec+ begins to relax restrictions. Higher crude production generates greater LPG supply from both associated gas fields and refineries.

By Aidan Lea

Propane Poland daf Brest spread to cif ARA large cargoes ($/t) $/t

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25/12/15

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25/12/11

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25/12/03

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