Propane prices and crack value crash lower in Europe

London (Quantum Commodity Intelligence) - The winter propane spike has collapsed this week with European prices crashing lower amid a recovery of US refinery rates and Saudi Aramco cutting its contract price for the first time in nine months, Quantum data shows.

May swaps for propane cargoes delivered into north Europe have dropped from a discount of $68/mt below naphtha cargo prices on April 12, down to a discount of $82/mt on April 13, and a discount of $102/mt on April 14.

Wide backwardation still persists in the nearby propane curve before the market flattens in June and July and then flips into contango, following its usual seasonal structure.

But the relative strength of propane has tumbled sharply.

Propane cargo prices in north Europe have dropped $18.25/mt from $497.50/mt on Monday down to $479.25/mt on Wednesday.

Meanwhile, front-month Brent prices have surged, with the June contract trading $2.75/b higher at 16.30 UK time on Wednesday compared to Monday.

US propane exports are set to rise, with refinery rates recovering from winter disruptions and the latest utilization rate at 85%, which is expected to continue to improve after this week's bullish outlook from the International Energy Agency for global oil demand.

But the global market is also expecting more supplies from Saudi Arabia as it unwinds its voluntary 1 million b/d cut in extra crude production over May and June.

Saudi Aramco set the April propane contract price at $560/mt, down $65/mt from March, the first month-on-month fall after nine straight months of increases.

The downtrend is expected to persist, judging from the front-month May CP swap, valued at $509/mt on April 8, $51/mt under the April term CP, while butane was at $492/mt, $38/mt below April CP.

Industry analysts expect Middle East LPG exports to grow between 4% and 5% this year to slightly above 37 million mt, and by around another 6% to 39 million mt in 2022.