US LPG comprising propane-heavy cargoes slated for November-arrival to Asia are estimated at around 2.1 million mt, led by an open West-to-East arbitrage, traders said in the week starting Oct. 25.
These are up from about 1.9 million mt for October-delivery, when hurricanes prompted delays or cancellation of some US shipments, they said.
While delays related to hurricanes remained a concern even as Tropical Storm Zeta is expected to make landfall on the Louisiana coast Oct. 28 and are supporting VLGC freight rates, prevailing worries are over the congestion caused by Panama Canal's COVID-19 measures.
"I think some shipments would be affected by the Panama Canal congestion," one Western trader said.
US propane exports so far in October have averaged 1.19 million b/d, a high since April, US Energy Information Administration data showed.
After hitting around nine-month highs of $467/mt on Oct. 15, front-cycle CFR North Asia propane retreated to $438/mt on Oct. 27.
With Saudi Aramco set to announce November term Contract Prices over the next few days, traders expect propane to be set at, or above $430/mt, and butane about $10/mt above that. This would be the second-straight month of increase for propane, and third rise in a row for butane.
Ample US arrivals in November will help meet a recovery in demand from China and North East Asia, which is expecting a colder-than-average winter at the year-end through February, traders said.
The delays in US deliveries to Asia in October had prompted Chinese importers to seek alternatives, including from the Middle East, to cover a demand upsurge following the Golden Week holidays and as propane dehydrogenation plants crank up operations to leverage robust propylene margins, traders said.
The open US arbitrage comes as traders estimate lower LPG supply from the Middle East coming to Asia in November of around 2.6 million to 2.7 million mt, down about 300,000 mt versus October.
Middle East exports fell 12% year on year to 8.8 million mt in the second quarter due to OPEC+ production cuts at 9.7 million b/d in May and June, BW LPG said in its financial report in August, to help the oil market recover from the effects of the coronavirus pandemic.
OPEC and 10 allies, including Russia, later tapered the cuts to 7.7 million b/d from August through the year-end, though the growth of COVID-19 cases in Europe and the US raised market concerns over OPEC's previously stated intention to relax output cuts from January.
Traders seeking to cover commitments into South Korea had also sought butane supply for second-half November in the week of Oct. 25.
Along with lower supply from the Middle East, which is expected to impact mixed propane/butane cargo availability and the dominance of propane in US shipments, the premium of butane to propane has remained wide around $13-$14/mt in recent days, market sources said.
But this is moderated by the pause in Indian and Indonesian demand till the end of the year, trade sources said.
