The price premium for delivered cargoes of North Sea propane over delivered cargoes of naphtha has increased on supply concerns, industry sources said Wednesday.
Based on Platts data, the price premium in early October was $54/mt, but by the end of the first 10 days, this had fallen to $10/mt before increasing again to reach $50/mt Tuesday.
Requirements for North Sea propane from the traditional heating sector have recently been thin, and, with propane prices at a premium to naphtha, demand from petrochemicals has now almost disappeared, but there has been some buying interest to cover trader short positions.
However, industry sources said it is the possibility of tighter supply which has affected the propane price premium over naphtha.
"Propane is driven by supply worries," said one trader.
Technical problems at the Braefoot Bay, UK, export terminal will reduce the volumes of propane available for export, and sources also said that the bullish market in Asia could also reduce the level of propane imports into Northwest Europe.
Despite the higher price premium which propane now has over naphtha the flat price of North Sea propane cargoes has not changed significantly in October.
At the beginning of this month the CIF price was just under $1,010/mt and has increased by only $17/mt since then to reach $1,024.50/mt Tuesday.
