Cargoes from America have had to replace all of the disrupted supplies out of West Asia, and this has driven spot premiums to an all-time high according to analysts and traders.
LPG exports out of West Asia, the number one supplier of LPG to Asia for cooking and petrochemical plants, have declined dramatically since the outbreak of the U.S.-Israeli war with Iran. The drop in LPG supply is causing the Asian petrochemical industry to shrink its margins and stop producing, which creates high prices and costs for millions of Asian homes; analysts and traders say. The number one importers of LPG in West Asia are India and China.
According to analytics firm Kpler, there was a 73 percent decline in LPG exports from West Asia from March 2008 to February 2009 to 419,000 bpd in March 2009 compared with February 2009.
The supply disruptions from the LPG supply shortage have caused spot prices in April for propane and butane from the Gulf to rise to their highest levels ever at $250 per metric ton above the March Saudi contract price swops on March 30, 2009, and this information is supported by Argus, the pricing agency.
Saudi Aramco increased both Propane and Butane prices for April as a result of the LPG supply shortage: Propane up $205 to $750 and butane up $260 to $800.
"Key importers such as India are actively diversifying their sourcing strategies, increasing procurement from the United States, Norway, Canada, and other regions alongside remaining Gulf supplies," said Vasudev Balagopal, global head of petrochemical trading at financial services platform Marex.
According to Kpler’s early projections, US LPG exports are on track to achieve an all-time high of 2.7 million BPD in April with approximately 1.8 million being shipped to Asia (up 14 percent) compared to March.
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On March 19, spot terminal prices were $273.525 for propane and $240.09 for butane in the Gulf, based on Argus data.
"We saw some additional propane still being offered to Asia for May arrivals," said Marex's Vasudev.
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However, Net Stone’s Greg Bower does not think that all of West Asia will be replaced and claims the US terminals are already nearly functioning at capacity prior to the conflict.
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According to data published by the US Energy Information Administration on March 27, the US had more than 48.4 million barrels of propane available.