Asian LPG prices shot to a 10-month high of $379.50/mt late Thursday, waking up from a protracted slumber, as robust appetite from China to stockpile for winter and a high-priced deal by oil kingpin Saudi Aramco this week set the stage for firmer prices, market sources said Friday.
"[There is] strong demand since winter is coming," said a source with a Chinese company.
The price was last higher on January 4, the first trading day of the year, at $385/mt, data from S&P Global Platts showed.
Chinese buyers such as Ouhua Energy, Star Gas, Oriental Energy and Tianjin Bohai have bought end October to early November arrival cargoes of propane and butane since late September.
Exact price details were sketchy but traders said some clips were done at Far East Index plus $1-$3/mt on a delivered basis.
Tianjin Bohai earlier this week bought an early November-arrival cargo from Turkish trader Bayegan.
The cargo was heard to be an evenly-split 44,000 mt parcel. Price details were not available.
The physical CFR Singapore-Japan propane price climbed $3.50/mt day on day Thursday -- bucking a $1.07/b ($8.56/mt) slump in the crude complex -- to be assessed at $379.50/mt.
The front month contango structure in Far East Index swaps has largely flattened out, while the CP swap structure has flipped into backwardation.
The November/December Far East Index swap flattened out from a $3/mt contango Wednesday to parity Thursday, while the November/December CP swap flipped to a $1/mt backwardation from a $1/mt contango over the same period.
The front month structure weakened slightly Friday morning, with November/December FEI swaps at minus 50 cents/mt and November/December CP swaps at plus 50 cents/mt
Further forward, December/January FEI and CP spreads were both pegged at plus $3/mt Friday morning.
"Demand is coming from China," said a Singapore-based trader.
Japanese buyers, on the other hand, remained on the sidelines as stock levels were still healthy and deemed largely sufficient to tide over winter.
SAUDI DEAL LIFTS MARKET
The other factor that gave the market an uplift was news of a deal by Saudi Aramco, heard done Wednesday, at a strong level.
Saudi Aramco was heard to have sold a 44,000 mt cargo comprising 11,000 mt of propane and 33,000 mt of butane for early November loading at $376/mt for propane and $406/mt for butane.
The buyer was said to be either Kolmar or trading company SHV Energy. SHV specializes in LPG downstream marketing.
"The Saudi sale price seems high, but the market is moving up," said the Singapore-based trader.
Saudi Aramco's fixed price deal is equivalent to a $5-$10/mt premium to the November CP, a source said.
Premiums in the Middle East for FOB AG cargoes have climbed since September; Qatar's Tasweeq early last month sold an October-loading cargo at parity to the CP.
The recovery in LPG market sentiment is a departure from the sluggish mood that has dominated over the past two to three months, when the market was awash with supply from a flood of US exports due to the shale oil revolution, sources said.
