Hurricane Harvey shuts down LPG exports to Asia by the US
Asian buyers of liquefied petroleum gas are already paying for disruptions half a world away in Texas as record rainfall halted shipments of propane and butane from ports that handle more than 90 per cent of US exports to the region.
Marine export terminals operated by Enterprise Products Partners LP, Targa Resources Inc and Phillips 66, all suppliers of the fuel, are shut because of closures at the Houston Ship Channel, Port of Beaumont and Port of Freeport, according to statements from the companies. Mont Belvieu, Texas, facilities belonging to Enterprise and Targa have also halted some fractionation operations, in which raw liquids are turned into products like propane and butane. There are no estimates yet for when the ports will reopen.
The US Gulf coast, home to the largest LPG storage caverns in the world, is a key global supplier, so events there can ricochet in markets around the world. As Hurricane Harvey made landfall near Corpus Christi, Texas, late last week, propane prices in Northeast Asia climbed. And as it approached the Louisiana coast before making a second strike Wednesday as a tropical storm, Middle Eastern producers said that they’re raising prices. Asian buyers, which import the fuel for heating and petrochemical production, were caught in the middle.
“Affected buyers will seek cargoes from elsewhere,” said Ong Han Wee, a consultant with FGE in Singapore. “The prices jumped last Friday in Asia, just before or when the hurricane made landfall. The Middle East contract prices are also higher now, most likely because of sentiment from Harvey.”
Northeast Asia propane swaps for September traded at a premium of US$6 a tonne to October prices on Wednesday, flipping from a discount of US$1 a tonne on August 22, data from broker Ginga showed. The unexpected drop in supplies is creating a backwardated market in which it’s relatively more expensive to get prompt cargoes than later deliveries.
Middle Eastern producers Saudi Arabian Oil Co and Kuwait Petroleum Corp announced this week that they would increase September contract prices for propane and butane by US$40 to US$60 a tonne amid bullish sentiment, traders said. These countries are the most likely alternative suppliers because they are nearest to Asia, Ong said.
