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US LPG exports are off to a strong start in August averaging 1.81 mn b/d to date after experiencing a minor decrease during June to July - from 1.62 mn b/d down to 1.53 mn b/d. Around half of the exports lifted in August thus far are indicting East Asia as their destination, pulled by an expected increase in demand for petrochemical feedstock.
Higher propane demand in China is anticipated now that the PDH maintenance season ends, which held operating rates under 50% since mid June. Additionally, the flexible-feedstock Gulei petrochemical steam cracker is expected to be commissioned this month.
VLGC availability for the remainder of August in the US is similar to that of the Middle East, despite unfavorable terms that include continued elevated US LPG prices, concerns regarding adequate propane stocks for fall/winter demand, and an increase in wait times at the Panama Canal.
Our Vessel Availability model identifies 32 possible VLGCs that are capable of meeting a laycan window ending August 31 for liftings in PADD 3 and 45 in the Middle East.
Although Middle East crude production increased by over 540,000 b/d during the month of July (Argus Media), exports of LPG declined 11% m-o-m, with flows into China, Japan, and Indonesia all decreasing. August exports are likely to improve with Saudi Aramco, ADNOC, and QP announcing acceptances for the month without cuts or delays. However, spot activity may be limited as the CP (contract price) for propane and butane increased in August by $40/mt and $35/mt respectively to $660/mt and $655, even though supplies are expected to increase in the region. Furthermore, freight rates on the Ras Tanura to Chiba route are trending upward.
Global LPG flows for the remainder of the year will garner momentum as supplies from the Middle East are expected to increase in the coming months. Appetite for LPG in Asia is likely to ebb and flow with changes in covid infection rates but no major demand destruction is anticipated. Going forwards, competition between US and Middle East barrels to demand centers is likely to increase by a notch, but tightness in the market will remain, at the very least for the remainder of this year.