Saudi Aramco likely to cut term June LPG exports further on crude curbs

Singapore — Saudi Aramco is expected to further cut or defer the number of term LPG cargoes for June-lifting, traders said Wednesday, after the Kingdom pledged to deepen oil supply curbs in June by an additional 1 million b/d below its quota under the OPEC+ pact and hold its output at 7.492 million b/d.

Traders said June exports are estimated at 410,000 mt to 460,000 mt, down from around 470,000 mt in May. The announcement of term nominations is expected around May 20, they added.

"Yes, if they really cut another 1 million b/d (of crude), it will affect LPG exports too," one trader said.

Saudi Aramco officials did not immediately respond to Platts' query on the matter.

Saudi Aramco last month announced acceptances of May-lifting term LPG nominations, with six to nine cargoes canceled or slated for deferral to the following month, traders said.

Saudi LPG exports in April were around 810,000 mt, they added. The large April export volume followed Saudi Arabia's move at that time 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.

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.

Another major Middle East producer, Qatar Petroleum, last week announced acceptances of June cargo nominations without cancellations and only one or two serious delays, trade sources said.

QP also issued a spot export tender, closing Wednesday for next day validity, offering a 45,000 mt evenly split cargo for June 18-20 loading, FOB basis. The issuance of a spot tender for export indicates that QP has ample supply for June.

Abu Dhabi National Oil Co. this week also announced acceptances of June term nominations without any cuts and only minor delays, traders said.

Traders said expectations of Saudi cancellations of June-loading term cargoes are expected to support Middle East and Asian prices, though this could be moderated by ample supply from other producers and a mixed demand outlook.

FOB Middle East propane was assessed at $277/mt on Tuesday, up from more than two-decade low of $151/mt on March 24. FOB Middle East butane was at $257/mt Tuesday, up from two-decade low of $191/mt on March 26, S&P Global Platts data showed.

While China's demand is recovering after industries resumed activities with the easing of measures to curb the COVID-19 pandemic, Chinese importers have resumed imports from the US in recent months.

India, which has bought around half a million mt of mixed cargoes via tenders for April-June, and also directly from Saudi Arabia, to secure supply to meet an increase in demand during the COVID-19 lockdown, has taken a pause after trade sources reported distribution bottlenecks and tight storage. This might have led to some cargoes being turned away, sources said.

Indonesia has also taken a break from buying after importing ample amounts to meet peak demand during the Ramadan fasting month and Eid festivities, traders said.