Saudi Aramco cancels, defers 6-9 LPG cargoes for May lifting: trade

Singapore — Saudi Aramco late Tuesday announced acceptances of May-lifting term LPG nominations, with six to nine cargoes heard canceled or deferred to the following month, traders said Wednesday.

The cancellations were more than the five to seven cargoes that traders had expected early last week, based on initial notifications given to lifters by Aramco.

The official announcement of monthly acceptances of term lifters' nominations was made later than the usual period of between the middle to 20th of each month.

"I think recent Saudi exporting cargoes per month averaged 12-13 cargoes, so if it is nine cargoes [canceled], almost all lifters were affected, or at least in the case of six, half of the lifters were affected," one trader said.

Another trader said Saudi LPG exports in April were seen at 810,000 mt, while for May will be 470,000 mt. "I was expecting May to be 420,000 to 500,000 mt," he said, adding the export volumes were within his expectations, taking into account the ample volumes in April. Saudi LPG exports comprise mixed or evenly split propane and butane cargoes.

The April export volume followed Saudi Arabia's move to export more than 10 million b/d of crude oil under a plan to supply the market with 12.3 million b/d of crude, including domestic consumption, after no deal was agreed between the OPEC+ alliance. But OPEC and its allies on April 9 agreed to claw back 10 million b/d of crude production over May and June, then 8 million b/d over the rest of 2020 and 6 million b/d in 2021.

Trade sources said Indian state firms have also been buying via tender about 500,000 mt of evenly split LPG from various sources for April-June deliveries, and the country was slated to start receiving LPG from Saudi Arabia from April to cover domestic needs during the nationwide lockdown to contain the COVID-19 pandemic.

The volume was not disclosed, though trade sources said it was higher than the long-standing term contracts between India and Saudi Aramco.

Traders said these additional commitments to India might also be a reason for the cancellations or deferments of May-lifting cargoes and the announcement delay. Saudi Aramco could not be reached for comment.

Traders said the lower supply from Saudi Arabia for May lifting and healthy regional demand have helped support LPG prices despite the meltdown in crude futures.

Early Wednesday, the May Saudi propane contract price swap was notionally indicated at $295/mt, down $10/mt from Tuesday's Asian close, while June Brent crude futures traded almost $42/mt below the previous Asian close.

"LPG price is so high compared to oil price," one trader noted.