The LPG markets have largely moved in tandem with crude as they take stock and await the fallout from the latest strikes
Global LPG prices are rising again but so far only with crude following renewed supply and shipping disruptions from revived US and Iran hostilities since 7 July. Spot activity remained relatively calm, with prices significantly trailing the March highs despite Tehran declaring the strait of Hormuz closed again, as the market weighed its options at a time of uncertainty over the duration of the fresh attacks.
US strikes on Iranian assets in the Mideast Gulf intensified over 11-14 July, and Washington said it would resume its naval blockade on Iranian shipments from the Gulf from 14 July. This comes as the risks to shipping along the strait increase after Iranian cruise missiles struck the UAE's oil tankers Mombasa and Al Bahiyah on 14 July. Iran also hit Cyprus-flagged containership GFS Galaxy over the weekend of 11-12 July. The UAE condemned the latest tanker strikes, called for the strait to reopen unconditionally and said it reserved the right to respond to the escalation.
Washington says it intends to keep the strait open despite Tehran's proclamations, but President Donald Trump has proposed charging Gulf states the equivalent of 20pc of a cargo's value to cover protection costs. Iran, which previously imposed a $1-2/bl toll on some tankers, has reiterated its own claim to be Hormuz's guardian. The competing assertions of control, continuing attacks and widening US blockade leave Mideast Gulf energy exports again exposed to delays, higher freight and insurance costs and possible diversions.
Northeast Asian propane prices on the Argus Far East Index (AFEI) firmed by more than $55/t to $650.25/t over 7-13 July, before jumping by $63/t to $713.50/t on 14 July, tracking sharp gains on front-month Brent crude. Concerns over tightening availability of US supply if Asian buyers rush back to the US Gulf coast for cargoes widened the August AFEI premium to Mideast Gulf CP equivalents to $88.50/t on 14 July, from $51/t on 10 July.
But Asia-Pacific buyers have so far shown little urgency to do so, with ample August availability capping gains on cargo premiums to paper. Market participants remained optimistic that renewed peace talks could quell the latest upheaval and that the market was better prepared this time. Major importers China, India and southeast Asia also have higher inventories, having absorbed some of the VLGCs that were released from the Gulf following the peace agreement in June.
US Gulf coast sellers raised their offers after strikes resumed, but high VLGC freight rates have stymied buyers from paying for higher-priced fob cargoes. The AFEI propane premium to Mont Belvieu LST hub prices widened to $273/t from $228/t over 7-13 July, while Houston-Chiba VLGC rates rose by $34/t to $229/t. The Mont Belvieu price increased to 73.4375¢/USG ($382.60/t) from 70.875¢/USG.
Northwest European large cargo prices for deliveries to the Amsterdam-Rotterdam-Antwerp hub failed to track these gains, firming by $14.50/t to $542.25/t over the same period, allowing it to lose ground against naphtha and AFEI values. This relative weakness in the region is due to high stocks, a backwardated market structure and limited summer demand.
