US Gulf Coast propane climbed to a 1-year high on Wednesday, pressured higher on gains in crude futures and an inventory draw in the region, despite a build nationally.
Non-LST propane rose 2.875 cents to 52 cents/gal, or 47% of crude futures as regional exports were expected to rise this month. The assessment was propane's highest since May 5, 2015, when Platts assessed non-LST propane at 52.75 cents/gal.
Market sources have said 27 VLGCs are expected to load from the Enterprise terminal, up from an average of 25-26 VLGCs per month since January. VLGCs can carry 44,000 mt, or almost 550,000 barrels. In the first quarter of 2016, 56% of cargoes loaded at Enterprise headed to the Far East, while 11% was destined for Europe and 25% to North America and the Caribbean, according to the most recent Enterprise presentation at an investor meeting.
Targa's Galena Park LPG export terminal and Sunoco's Nederland terminal typically load 7-8 cargoes each month, a market source said.
While total US propane and propylene stocks grew 1.32 million barrels to 73.2 million barrels in the week ended May 6, Gulf Coast inventories fell for the second straight week, down 143,000 barrels to 49.2 million barrels, according to US Energy Information Administration data released Wednesday.
Lone Star barrels have been trading at a discount to Enterprise since the beginning of May, climbing as high as 75 points. On Wednesday, LST propane was at a 50-point discount. Since early February, the spread had been at or near parity.
Market sources originally said the widening spread could be due to a seven-day Enterprise propylene splitter outage that ended April 27, which may have left some customers short propane. They have since suggested increased cargo demand for the widening spread.
Most of the cargoes are contracted but there have been some spot deals, sources said.
FOB Houston propane was assessed at a 4-cent premium over pipeline product, or 55.78 cents/gal based on a netback analysis and an offer heard at plus 5.50 cents/gal.
Freight rates rose slightly to $31/mt for the Houston-Flushing route and $65 for Houston to Japan.
"I see little quantity of vessels for June," a trading source said regarding higher freight rates. "Owners would rather go East, so the premium to keep West is going up."
