US propane exports hit record high on surging European, Asian demand

US propane exports continued to rise in September, climbing to a record high 2.2 million b/d, S&P Global Commodities at Sea data showed. The increase from August was driven by exports to Europe, although Asia remained the primary destination for US propane, butane and ethane.

Total US propane, ethane and butane exports remained steady at 3.2 million b/d, according to CAS. Asia took in 38 million barrels of propane, 10.4 million barrels of butane, and 13.7 million barrels of ethane in September. Europe followed, importing 122,000 barrels of butane, 12 million barrels of propane and around 2 million barrels of ethane from the US in the same month.

The firm exports have driven up premiums. The average propane and butane FOB Gulf Coast premiums to their respective Mt. Belvieu prices more than doubled to 10.8 cents/gal from 5.3 cents/gal month to month, according to Platts data. Platts is a part of S&P Global Energy.

The increase in export shipments has also driven VLGC shipping rates higher, with the Houston-Japan route averaging 57.45 cents/gal in September, up from 52.19 cents/gal the prior month. Over the same period, the Houston to Northwest Europe route averaged 31.27 cents/gal compared to 30.71 cents/gal

The US is increasingly acting as the replacement supplier for constrained Middle East LPG barrels into Asia, where buyers are seeking supply security amid regional disruptions, according to an October North America NGL Market report by S&P Global Energy CERA analysts.

Mainland China also remains the dominant importer of US ethane, absorbing approximately 70% of total export volumes, according to CERA, and this is keeping ethane export terminals running hard. Energy Transfer's Marcus Hook terminal, for instance, is operating close to full capacity of 75,000 b/d, CERA said.

According to CERA analysts, NGL markets are moving in tandem with crude prices. Ethane prices in Mont Belvieu averaged 25.24 cents/gal in September, up from 24.0 cents/gal in August. At the same time, Platts Mont Belvieu propane prices averaged 81 cents/gal in September, up from 69 cents/gal in August and the propane-to-WTI ratio rose to 37% from 35%.

Robust VLGC freight and weaker seasonal demand have posed as headwinds for US propane prices. Warmer weather is also expected to limit upward price pressure, CERA said.

Though analysts are also pointing to Panama Canal congestion, uncertainties around US-Iran negotiations and shipping through the Strait of Hormuz as ongoing risk premiums in the market, "even as the base-case market tone turns softer," they said.