Qatar's July-loading term LPG acceptances meet lifters' nominations

Singapore — Qatar Petroleum for the Sale of Petroleum Products, or QPSPP, has announced acceptances of term LPG nominations for July loading without cuts or delays, similar to that for June loading, traders said on June 5, keeping the Asian market well supplied amid reduced Saudi supply.

Some trade sources said QP might have also moved forward the loading dates slightly for some lifters.

QP has over the past weeks sold three spot cargoes for June loading. Late last month, QP sold a 44,000 mt cargo comprising 33,000 mt of propane and 11,000 mt butane for June 25-26 loading at a discount of $10/mt to Saudi Aramco July contract prices for propane and butane, FOB basis.

Trade sources said the ample export volumes from Qatar is because the LPG is produced from gas plants rather than crude, so is not affected by cuts by OPEC-plus members, and LNG trains have been running at higher rates recently.

Qatar's long-delayed Barzan gas project is also expected to operate in 2020, though it was not yet clear when, or if, it had started, trade sources said.

The project is expected to boost Qatari gas production by up to 2 Bcf/d when it reaches full capacity. Trade sources said LPG production is estimated at 300,000 mt/year, while the Qatari oil minister had previously said that LPG production will rise 500,000 mt/year with the commissioning of the project.

The next major Middle East producer due to announce July acceptances is ADNOC on June 10. ADNOC last month announced acceptances of June-loading nominations without any cuts and only minor delays, trade sources said.

This will be followed by Saudi Aramco the week after next. Saudi Aramco had canceled or deferred cargoes for May and June loadings.

In its acceptances for June loading, Aramco canceled or deferred up to 10 cargoes.

Among the cargoes canceled, five were slated for Indian buyers and four for other buyers and traders, trade sources said. They added after heavy purchases of around 500,000 mt over April-June to prepare for increased household demand amid extended lockdowns to curb the COVID-19 pandemic, India had to grapple with bottlenecks at bottling plants and distribution congestion.

Indian buyers are again expected to defer some cargoes in July, trade sources said.

KUWAIT TENDER NOT AWARDED

Gibson shipping brokerage said in a report that OPEC+ production cuts had weighed severely on LPG exports from the Middle East since May, when just over 2.5 million mt were exported, down from almost 3.5 million mt in April. The 1 million mt drop in exports is equivalent to around 22 cancelled VLGC loadings in a month, leading to sliding freight rates, it said.

Saudi exports halved between April and May to 500,000 mt, with sharper falls seen in other Middle East producers except Iran, which gained from the recovery in Chinese demand as domestic industrial activity resumed after the COVID-19 lockdowns, it said.

While Qatari exports jumped to around 1 million mt in April, they fell to below 800,000 mt in May, according to Gibson.

Traders said despite the Saudi-driven decline in Middle East exports, Asia is comfortably supplied wth US-led CFR exports from the West. This may have led to Kuwait Petroleum Corp. not awarding its latest tender that closed June 4 offering 44,000 mt of evenly split cargo for July 1-2 loading.

A trade source said this could be because the bid levels were too low, adding that in the current market, the discount for FOB Middle East cargoes could be as deep as mid-$20s/mt to the Saudi contract prices.

"There are too many (Western) cargoes around, depressing FEI," he said, referring to the Argus Far East Index, which indicates CFR cargoes. "Its about the price," he added.

This has turned the July propane FEI swaps to a discount to the CP swaps, widening to be notionaly indicated at $3/mt early in June 5, from $1/mt at the precvious day's close.

The front-cycle CFR North Asia H1 July physical propane discount to July CP swap was also assessed at a steeper discount of $8/mt on June 4, from $2/mt the previous session, while the H2 July propane differential flipped to a $4/mt discount on June 4 from a $2/mt premium the previous session, S&P Global Platts data showed.