Saudi Aramco has sold its first spot LPG cargo for October, which could be its only one for next month, with the price seen as providing some clue on where the Middle East major will set its October Contract Price, traders said Wednesday.
They said Aramco sold the evenly split cargo of 11,000 mt propane and 11,000 mt butane at an average of 985/mt to Astomos, Japan's top LPG buyer and supplier. The price worked out at $1,020/mt for the propane lot and $950/mt for butane.
The deal could not be immediately confirmed by either party.
"Aramco uses $1,020 as the benchmark to calculate the average price of $985," one market source said.
Another trader said Aramco could use $1,020/mt as an indication of where it could set its October CP for propane, allowing for a spread of around $70 for butane and hiking the CP for the third month in a row. Aramco is expected to announce its October CP at the weekend.
"This is 11+11 basis, so it's a bit difficult to evaluate, I but think over $1,000 is the value," a third trader said.
A poll of six traders Tuesday showed prices at $985, $990, and $1,000/mt or above for the Saudi propane CP.
Saudi Aramco sold two 44,000 mt cargoes of propane for September loading. The first was sold late August at $930/mt to Switzerland-based trader Glencore, and a few days later Aramco set the September CP for propane at $970/mt and butane at $930/mt, up $195 and $155, respectively, from the August CP.
It sold a second cargo for September loading at $1,020/mt. It was later met with bids for a third September parcel at up to $1,080/mt, but Aramco was only willing to sell at more than $1,100/mt. This indicated their lack of spot cargoes, as supplies are concentrated on meeting demand for feedstocks at domestic petrochemical plants, sources said.
LIMITED MIDDLE EAST SUPPLY
Traders also said they doubted Saudi Aramco would be able to offer a second parcel for October loading, even though its sale for next month was a smaller 22,000 evenly split lot, not its usual full 44,000 mt cargo.
Sources had earlier said Aramco's exports of spot LPG are expected to be limited for the rest of the year to one cargo per month, though buyers are hoping for more from the producer as the North East Asian winter nears and Japan grapples with low stock levels.
"Saudi Arabia is cracking 1.2 million mt more propane," one Western trader said. He added that overall supplies from the Middle East are also down. "There are fewer spot exports from Iran, fewer from KPC."
Spot exports from Iran were limited to three cargoes per month in August and September following a petrochemical plant fire in early August, while October supplies were unclear. Kuwait Petroleum Corp. is not expected to export any spot cargoes until the end of the year, and if it does will be limited to just one cargo in November, sources said.
Top exporter Qatar is still undergoing maintenance on its LNG trains, which has kept spot exports at negligible levels, traders said.
The market has been under some pressure over the past week, largely due to the slide in ICE Brent crude futures, pushing down the price of propane for delivery along the Singapore-Japan route 30-45 days forward from a near six-month high of $1,148/mt on September 13 to $1,039/mt on September 20, the lowest since August 31.
The strong firm Saudi deal for October offered support to the faltering propane market which rose to $1,047/mt on Wednesday, gaining $1/mt from Tuesday and defying the more than $8/mt fall in Brent crude futures from the previous Asian close, according to Platts assessment.
The lack of FOB cargoes from the Middle East has also driven down freight for Very Large Gas Carriers plying the major Persian Gulf-Japan route with refrigerated LPG cargoes. On Wednesday, freight fell to $63.63/mt, the lowest since early May. Rates have fallen more than 17% since hitting a near 10-month high in mid-August, Platts data show.
"It would not surprise me if it goes down further," a shipping source said.
