Asia butane at premium to propane after three months on tight mixed-cargo supply

Asia's butane-propane spread shifted to a premium Aug. 8 for the first time in three months, after touching parity the previous session, on tight supply of mixed cargoes from the Middle East and costlier butane versus propane in the US, traders said.

Butane was last higher than propane on May 3, at a $1/mt premium after initially moving to a $1.5/mt premium on May 2, S&P Global Commodity Insights data showed.

Platts, part of S&P Global, assessed CFR North Asian butane at $654/mt on Aug. 8, down $4/mt from a near five-month high the previous session, while CFR North Asian propane was assessed at $653/mt Aug. 8, down $5/mt on the day.

"US butane is getting higher this year earlier than normal, or US propane is too cheap," one North Asia trader said.

"AG [Arabian Gulf] is tight, affecting the butane demand/supply balance more than propane balance. ATC [Aramco Trading Co.] has stopped selling cheap CFRs [cargoes], or ATC just physically has no cargoes to sell cheap."

Trade sources have said that the trading unit of Saudi Aramco has less spot CFR cargoes to offer for July loading and hardly any for August loading, compared with previous months when it offered around 10 to up to 17 cargoes/month.

This has been attributed to Saudi Arabia's pledge to oil cuts starting July, under its commitment to the OPEC+ alliance.

Saudi Arabia will continue the 1 million b/d output cut that is keeping its crude production at a two-year low of 9 million b/d, and vowed to further extend, or extend and deepen its voluntary cuts in future.

Equinor, which has been bidding for mixed propane/butane cargoes since Aug. 4, is "short of supply and there seem to be less FOBs available in the Middle East for September, another trader said.

The Norwegian energy major on Aug. 7 bid for a 44,000 mt evenly split cargo, as well as a cargo comprising 11,000 mt propane and 33,000 butane for Sept. 1-30 loading , FOB Middle East, at $557/mt for both propane and butane portions.

With those bids, Platts assessed the FOB Middle East premium at $19/mt to the September Saudi Contract Prices Aug. 7.

Equinor continued to bid on Aug. 8, for 44,000 mt of evenly split cargo for Sept. 1-30 loading, FOB Middle East, which included Kuwait, Qatar, the UAE and Yanbu (Saudi Arabia), at parity to the Saudi October CPs, as well as at a $10/mt premium to Saudi September CPs.

With these bids, Platts assessed the FOB Middle East premium at $16/mt to the September Saudi CPs Aug. 8.

Vitol had also bid for a 46,000 mt evenly split cargo of Middle East origin on Aug. 2 for H2 September delivery, underpinning demand for mixed propane/butane cargoes from the Middle East.

No offers of Middle East cargoes were heard in the Singapore physical market during the period and it was not immediately heard if the respective bids were booked.

Eyes on India demand

While spot imports from India -- which normally buys butane-heavy, or evenly split cargoes for household users -- have not been heard in recent months during a traditionally slow demand season that is expected to last till September, state-run Hindustan Petroleum Corp. Ltd., or HPCL, has emerged seeking a total 2.335 million mt of mixed propane/butane for deliveries over January-December 2024.

The term tender, which closes Aug. 10 with next-day validity, also lent support to the butane market, trade sources said, adding Indian state oil firms have to secure some base-load volumes for domestic customers.

Indian importers are expected to resurface seeking spot cargoes in the fourth quarter, with the onset of major festivals.

In the US, Platts assessed Enterprise normal butane down 1.25 cents/gal to 88.75 cents/gal, while propane fell 75 points to 73.75 cents/gal Aug. 7, reflecting a 15 cents/gal premium of butane versus propane.

The price falls came as refined product output is undergoing the lowest level of refinery outages in 2023, with global refinery downtime for the week ended Aug. 4 down about 540,000 b/d to a total of 4.74 million b/d, while North America refinery outages are projected to drop by 115,000 b/d to around 200,000 b/d for the week ending Aug. 11, an Aug. 4 report by S&P Global showed.

Across Europe, butane's continued competitiveness as a petrochemical feedstock and increased buying interest has supported butane prices.

While US butane exports into Northwest Europe rose in July versus June, forecasts in early August expect US butane exports to be subdued in August, Kpler shipping data showed.