LPG 'relatively unscathed' by 2020 turbulence: Argus
Global LPG demand has been left "relatively unscathed" by the Covid-19 pandemic, delegates heard at Argus' LPG Market Discussion today.
Last year was a near "Covid-proof" year for LPG relative to the wider oil products market, with Argus estimating that demand fell by just 2pc, or roughly 6mn t, from 323mn t in 2019. This compares with drops of 14pc for gasoline, 7pc for diesel and 10pc for crude. LPG "has not at all been impacted in the same way" and was "much more resilient" due to its more diverse demand profile, said Argus' LPG business development executive David Appleton.
Driving this resilience was rising import requirements from most of the large demand centres in Asia-Pacific, with the exception of Japan. LPG imports to China, India, Indonesia and South Korea rose by 3pc to hit 60.1mn last year, according to Argus data. While "growth is smaller than previous years" in these rapidly expanding markets, it remains "striking in the current environment", Appleton said. The expansion of China's domestic petrochemical sector, including new propane dehydrogenation (PDH) and ethylene crackers coming on stream, was a key driver of demand growth there, while Indian imports were underpinned by rising demand for heating and cooking, buttressed by a "flagship government policy" supporting domestic LPG use, Appleton said.
In contrast, European petrochemicals was a sector that saw a substantial drop in LPG demand in 2020, with consumption slipping to just under 13mn t last year from around 14.5mn t in 2019, according to provisional Argus data. Flexibility in operations and the coastal location of many European crackers allow feedstocks to be switched with relative ease. Last year, when resilient LPG demand in other sectors led to a sharp rise in propane prices versus alternative feedstock naphtha, which was under pressure from a global drop in gasoline blending demand, propane consumption at European petrochemical plants fell.
Meanwhile, LPG use in commercial and transport sectors declined globally last year, driven by the impact of the pandemic on economic activity and travel. Argus estimates that transport and commercial LPG fuel use dropped by a fifth to around 32mn t in 2020. These losses are "in principle" reversible, given that Covid-19 was the core driver, according to Appleton.
Trade flow trends
Besides reviewing 2020, the discussion also focused on trends in LPG trade flows over the last decade and the impacts these have had on LPG values and price benchmarks globally. The US' transformation from a net importer at the beginning of the last decade to being the world's largest exporter, both by volume and by geographical reach, is the dominant trend. In the last five years, the US has "almost doubled its market share" in Asia-Pacific's five biggest markets — China, India, Japan, South Korea and Indonesia — and "2020 saw more than one third of imports into those countries originating in the US", Argus senior vice-president and head of LPG in the Americas Vanessa Viola said.
"We can also see major changes in the LPG trade between the US and Europe," she said. The US' share of European LPG imports has risen by 10 percentage points in the last five years to reach 36pc in 2020. Argus expects this trend to continue, helped by "structural changes in the Russian market", Viola said. A steady decline in Baltic LPG exports is expected to continue as Russia diverts domestic supplies to its rising petrochemical capacity.
These stark shifts have had a significant impact on LPG pricing globally, with high US supply prompting increasingly strong correlation between regional benchmark prices in the US and prices in the key net import regions of Asia-Pacific and northwest Europe. "With US LPG conquering market share both in Europe and Asia, the biggest question has been which trading hub leads which benchmark," Viola said. "What we've seen is that in an oversupplied market it is typically the destination that sets the global price of LPG."
Given the abundance of US supply, it is Asia-Pacific delivered prices, specifically the Argus Far East Index (AFEI) price assessment, that are most often leading price direction in the US, as opposed to domestic factors. The AFEI netback to the US — AFEI minus Houston to Japan freight costs — is tightly connected to US Gulf coast propane export pricing — US pipeline plus terminal fees. The multi-year correlation between the two price series is very strong, delegates heard. The AFEI often goes as far as giving price direction for the delivered large cargoes market in northwest Europe, which is assessed under the Argus cif ARA benchmark. This is because European buyers must compete with their counterparts in Asia-Pacific for spot US propane.
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LPG World editorial: Fragile stability
LPG World editorial: Fragile stability
Subtle shifts in power following months of elections around the world could provide opportunities for the LPG industry London, 16 July (Argus) — The energy policy ramifications of several significant governmental elections that have taken place over the past few months are starting to come into focus. For the LPG market, all presently point to more of the same, while the climate and energy transition objectives that will shape the sector's future have so far escaped derailment from far-right forces in all but the US' yet-to-be-held presidential race. The recent campaigns in India and Mexico, two major LPG markets, ended in the unsurprising re-election of their two governing parties. Indian prime minister Narendra Modi secured a third term in June after a campaign that promised competitive LPG pricing and a recommitment to the expansion of the market to less affluent areas that still lack access to clean cooking. In the same month, Mexico's Claudia Sheinbaum won her race to succeed President Andres Manuel Lopez Obrador as the left-wing Morena party's incumbent. His government has pursued nationalist energy policies that have caused friction with private-sector LPG operators. This is unlikely to deviate, with some concerned that energy reforms could even be repealed. Maintaining LPG price controls and tackling theft and black-market practices should remain priorities regardless when she takes over in October. European Parliament elections, also held in June, saw significant gains for far-right and right-wing groups, seen as a backlash to green policies and rising costs. But the ruling centre-right EPP group ultimately won that race, leaving Ursula von der Leyen on track for a second term as European Commission president. This should keep the EU's bold climate and energy objectives under the Green Deal on track, although a softening, more pragmatic approach could emerge following a broader parliamentary shift of power from the centre left to the centre right, delegates at last month's Liquid Gas Europe Congress in Lyon heard — something that could benefit the LPG industry. France's snap election at the turn of this month, following a surprise surge in French votes for the far right in the European poll, looked at one stage to be ending in victory for the far-right National Rally party. But a coalition of left-wing parties unexpectedly secured enough votes to beat the National Rally into third position, while falling short of securing a majority, ending in a hung parliament. Outgoing president Emmanuel Macron has urged the New Popular Front coalition to ditch the far-left Unbowed party and join his centrist group, which came second, to ensure a majority. What government emerges is uncertain, but for now the country's energy transition and climate policies are secure and legislative stability is likely. The UK had no problem securing a majority, as the incoming centre-left Labour party ousted the centre-right Conservatives in a landslide defeat this month. A huge parliamentary majority will give prime minister Keir Starmer's government free rein to pursue its energy and climate goals, yet these bear a striking resemblance to Boris Johnson's during his premiership in 2019-22. The forming of a new state-owned energy company could be boon or bane for LPG. But the UK LPG sector has wasted no time wooing Labour as it advocates for the protection of gas boilers in rural areas and more support to produce renewable alternatives. American non-fiction The US is conversely heading for another U-turn on its energy and climate policy trajectory as Donald Trump inches nearer to a return to office in a campaign that almost feels unreal. Should he succeed, he is expected to once again pull out of the Paris climate deal and reinstitute a favourable regime for licensing oil and gas wells and LNG projects — a possible boon for LPG supplies. Trump's seeming obsession with economic decoupling from China is also likely to disrupt global trade. Yet Chinese petrochemical firms seem unfazed, as they invest in ethane-fed capacity and ships to import more US supply. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Heavy rain, wind expected in Houston from Beryl: Update
Heavy rain, wind expected in Houston from Beryl: Update
Houston, 8 July (Argus) — Tropical storm Beryl is expected to regain hurricane strength before coming ashore near Matagorda, Texas, early Monday, bringing heavy rain and wind to the Houston area. As of 8pm ET Sunday, the center of the storm was about 120 miles east-southeast of Corpus Christi, Texas, with maximum sustained winds of 70mph, moving northwest at 12mph, according to the National Hurricane Center (NHC). The storm track forecast has shifted to the north of Corpus Christi, likely sparing that city's refining and oil export industries from the most severe conditions, although Citgo said its 165,000 b/d Corpus Christi refinery is running at reduced rates as part of its hurricane preparedness plan. Peak storm surge of 4-7ft is expected between Matagorda Bay and San Luis Pass, including at Freeport, home to a number of petrochemical plants and an LNG export terminal. Galveston Bay, which includes numerous refineries and oil export terminals along the Houston Ship Channel and Texas City, is expected to see 4-6ft of storm surge. The ports of Houston, Galveston, Freeport and Texas City were closed to all traffic at 5pm ET Sunday, according to the US Coast Guard. The Port of Corpus Christi has been closed since Saturday afternoon. US Gulf coast refiners appear to have robust fuel inventories for this time of year should the storm lead to operational issues. The four-week average of Gulf coast gasoline inventories in the week ended 28 June was up by over 4pc from the same period in 2023 and up by 6pc from 2022, after hitting a near six-month high in the penultimate week of June. Residents and businesses in the Houston area may see power outages Monday from the high winds, according to local emergency management officials. Rainfall is expected to range between 6-10 inches with 15 inches in some isolated areas, according to NHC. Little oil, gas production disruption Disruptions to US Gulf of Mexico oil and gas operations appear to be limited given Beryl's approach to the west of most US offshore oil and gas operations, although some platforms were evacuated late last week. Chevron said it has already started to send non-essential workers who were evacuated back to offshore facilities. Mexican offshore operations were halted late last week when the storm first entered the Gulf after passing over the Yucatan Peninsula. Early last week Beryl was a Category 5 storm, which made it the strongest on record for the month of July, as it left a trail of destruction in the Caribbean . The second named storm of the 2024 Atlantic hurricane season, Beryl followed tropical storm Alberto, which came ashore in northeastern Mexico late last month. This year's Atlantic hurricane season is expected to be more active than normal, according to the US National Oceanic and Atmospheric Administration, with 4-7 major hurricanes that pack sustained winds of 111mph or higher possible. By Tom Fowler, Nathan Risser and Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Beryl aims between Corpus Christi, Houston
Beryl aims between Corpus Christi, Houston
Houston, 7 July (Argus) — Tropical storm Beryl was expected to regain hurricane strength today before coming ashore between Corpus Christi and Houston, Texas, early Monday. As of 11am ET today the center of the storm was about 195 miles southeast of the refining and oil export hub of Corpus Christi with maximum sustained winds of 65mph. Moving northwest at 10mph, its landfall was expected at about 2am ET Monday, according to the National Hurricane Center (NHC). The track of the storm's landfall has moved toward the east for the past two days, moving Corpus Christi out of the area likely to see the highest winds and storm surge. The most powerful winds and storm surge should be centered on areas near Matagorda Bay, according to the forecast, with 4-6ft of storm surge expected. Galveston Bay, which include numerous refineries and petroleum export terminals along the Houston Ship Channel and Texas City, was expected to see 3-5ft of storm surge. The port of Corpus Christi was closed to all traffic as of Saturday afternoon while the ports of Houston, Galveston, Freeport and Texas City were set to "Yankee" status at 8am ET today, suspending all inbound traffic, bunkering and lightering operations. The Houston-area ports were expected to close to all traffic later today as the storm nears landfall, according to the US Coast Guard. Disruptions to US Gulf oil and gas operations so far appear to be limited given Beryl's approach to the west of most US offshore and gas operations. Mexican offshore operations were halted late last week when the storm first entered the Gulf after passing over the Yucatan peninsula. Early last week Beryl was a Category 5 storm, which made it the strongest on record for the month of July, as it left a trail of destruction in the Caribbean. The second named storm of the 2024 Atlantic hurricane season, Beryl followed tropical storm Alberto, which came ashore in northeastern Mexico late last month. This year's Atlantic hurricane season is expected to be more active than normal, according to the US National Oceanic and Atmospheric Administration, with 4-7 major hurricanes that pack sustained winds of 111mph or higher possible. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US adds 206,000 jobs in June, jobless rate ticks up
US adds 206,000 jobs in June, jobless rate ticks up
Houston, 5 July (Argus) — The US added a solid 206,000 jobs in June while job gains in the prior two months were revised downward and wage gains cooled. The job gains, which beat analyst estimates, followed downwardly revised 218,000 job gains in May and 108,000 gains in April, the Bureau of Labor Statistics (BLS) said today, for a combined downward revision of 111,000 for the prior two months. The US generated a monthly average of 220,000 jobs in the 12 months through May. Economists expected gains of about 190,000 in June, according to a survey by Trading Economics. The jobless rate ticked up to 4.1pc, the highest in more than two years, from 4pc. Still, the unemployment rate remains near five-decade lows. Construction added 27,000 jobs, while manufacturing lost 8,000 jobs. Gains also occurred in government, health care and social assistance. Average hourly earnings rose by 3.9pc from a year earlier, down from a 4.1pc annual gain in the prior month and the lowest in three years. Futures markets after the jobs report indicated a 71.8pc chance the Fed will cut its target rate by a quarter point from a 23-year high in September, up from 68.4pc odds on Wednesday. The Federal Reserve, after its last policy meeting in mid-June, had penciled in one likely quarter point rate cut was likely this year, paring that from a likely three cuts shown in March. Still, it also said it needs to see evidence that inflation is "sustainably" slowing towards its 2pc target before beginning to cut rates from 23-year highs. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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