ADNOC accepts July LPG nominations without cuts; lifters to lower Saudi nominations

Singapore — Abu Dhabi National Oil Co., or ADNOC, has announced acceptances of term LPG nominations for July loading without cuts or delays, similar to that for June loading, and after Qatar Petroleum last week did the same, traders said on June 10.

"Yes, [there were] no cuts and no delays and heard some of the lifters received earlier dates against their nomination dates, like 10 days earlier," one trader said.

Ahead of Saudi Aramco's announcement of July-loading term cargo acceptances next week, traders said they expect lifters to reduce nominated volumes from usual levels, even after Aramco had canceled or deferred cargoes for May and June loadings in line with production cuts by OPEC+ members.

Aramco had canceled or deferred up to 10 cargoes for June loading, also due to less demand from Indian lifters.

"I think Saudi exports [will] remain low while they continue to cut crude production," another trader said, referring to the agreement by OPEC, Russia and allies to record oil output cuts till end-July, by withdrawing almost 10% of global supplies from the market, which helped crude prices to double in the past two months.

Traders said Indian buyers are again expected to defer some term Saudi cargoes in July and might not return to buy next month. But they may return in August if stocks are drawn down and the bottling and distribution bottlenecks following the previous buying spree to secure April-July supply during COVID-19 lockdown measures, have eased, traders said.

The prevailing absence of Indian and Indonesian demand for mixed cargoes from the Middle East, and preference among North Asian buyers for cheaper CFR Western cargoes, are putting pressure on FOB Middle East shipments, traders said.

PROMPT MARKET FLIPS TO CONTANGO

The July/August CP propane swaps have flipped to a $1.50/mt contango in morning indications on June 10, from a $1/mt backwardation at the Asian close on June 9. This contrasted with the wide prompt month backwardation of $25/mt on May 28, S&P Global Platts data showed.

The August/September contango has also widened to $1.50/mt in early indications on June 10, versus a 50 cent/mt contango at the June 9 close. This signals that the bearish sentiment is gradually extending to forward months, despite hopes that Indonesian demand could also stir from slumber in August, while the recent Chinese demand resurgence could slow, traders added.

Traders also pointed to the fluctuating spread between Argus Far East Index propane swaps, indicating CFR Western cargoes and the CPs, which indicates FOB Middle East cargoes, to show firm appetite for ample Western cargoes in Asia.

Early on June 10, the July propane FEI/CP spread was at a narrow $4/mt premium versus plus $3/mt the previous session, compared with minus $25/mt on June 8, Platts data showed.

"This signals the CP is weak," the first trader said.