Saudi Aramco has sold its first spot LPG cargoes for September loading this week, at a time of escalating prices amid concerns over lower shipments from Qatar next month and low July inventories in Japan, traders said Thursday.
The Middle Eastern oil and gas major on Wednesday sold 44,000 mt of propane at $930/mt for end-September loading, on a FOB basis, which traders said had been bought by Swiss trading giant Glencore.
That sale came after Saudi Aramco was heard to have sold a cargo of 33,000 mt of propane and 11,000 mt of butane earlier in the week for early-September loading at a lower price of between $900/mt and $930/mt, FOB basis, to European oil major Shell, traders said.
The identities of the buyers and prices for both sales could not immediately be confirmed.
Traders said Aramco is offering a third cargo for next month and is targeting a higher price.
"Heard Saudi Aramco's next spot target is at $950," one trader said.
The market is watching to see whether Saudi Aramco will be capitalizing on the expected shortage of exports from Qatar and offer more cargoes for September, after Saudi spot shipments fell by 64% in August versus the bumper exports in July.
Saudi Arabia also announced earlier this month nominations for its September-loading term cargoes, without any volume cuts or delays.
Qatargas is scheduled to shut its LNG Train 5 in September for a 40-day maintenance period. Qatari state marketing firm Tasweeq normally sells an average of 19 to 20 full cargoes every month on both a term and spot basis.
Industry sources said Aramco exported up to 11 spot LPG cargoes of 44,000 mt each in July, but this fell to just four cargoes, or 176,000 mt, for August.
EYES ON SAUDI SEPTEMBER CP
The sale price achieved by Aramco for September is up from around $865/mt for August.
Traders told Platts that, with the higher export prices, Saudi Aramco is expected to hike its September Contract Price for propane and butane to more than $900/mt, from $775/mt for August, the first time the CP would be set above $900 since May.
The July propane CP was set at a 33-month low of $575/mt, while the July butane CP was at $620/mt.
The rally was also reflected on the swaps market on Wednesday, when the front-month propane CP swap was heard traded at $894/mt and $897/mt, up from trades on Tuesday at $875/mt. These were heard followed by a trade in Europe at $920/mt.
On Thursday, bids on the front-month propane CP swap were heard as high as $952/mt, with an offer seen at $972/mt, although nothing was traded.
"Yes, it's going to get stronger," one European trader said. "The Qatar outage involves 100,00 mt of LPG. And Japan stocks are short."
Japan's LPG stocks slid by 4.6% to 1.84 million mt at the end of July, and were also down 11.5% year-on-year, largely due to lower imports, data from Japan LPGas Association released Wednesday showed.
Except for April and June, Japan's LPG inventory levels have dropped on a year-on-year basis for eight of the previous 10 months. Japan imported 954,000 mt of LPG last month, down 5.5% from June and down 12.6% from a year ago, the data showed.
Mandatory LPG stocks at the end of July stood at 1.66 million mt, a rise of 1.04% from June and up 10.6% from a year ago. Japanese suppliers are required by the Ministry of Economy, Trade and Industry to hold inventory equal to at least 50 days of consumption.
One trader said the stock level is the "lowest in a long time versus mandatory stocks."
Traders said this shortfall is prompting Japanese traders to seek cargoes. For example, one trading house has a running stock of 90,000 mt in July, versus its usual level of nearly 400,000 mt.
"And we hear from another importer demand in August is quite good," one trader said. "So, we expect to see propane go easily over $1,100/mt in the next month."
