Saudi Aramco has decided not to allow the usual 10% tolerance on the plus side for its January term butane exports, while there will be a 10-day loading delay in LPG shipments to Asian buyers, term lifters said Tuesday.
But in its announcement of acceptances of nominations for cargoes to be exported next month, the Middle Eastern giant will not cut term supplies of butane and propane from the contracts, the lifters added.
No reasons were given for the loading delay or the removal of the 10% tolerance for January, though some traders said this could be due to operational reasons. LPG suppliers typically provide a 5-10% plus/minus tolerance on nominated volumes.
The last time Saudi Aramco cut supplies was in May last year, when it slashed butane volumes scheduled for export on a contractual basis to term customers for June 2011 by a third, to divert feedstocks to domestic petrochemical plants, trade sources had said.
At that time, Aramco also did not allow the usual 10% tolerance on the plus side for its butane exports.
But traders said the impact of the 10-day delay and the removal of the 10% tolerance on shipments would be minimal, unless Aramco were to cut export volumes from the main term contract.
"Also this is not huge news as they don't export that much butane, but I guess the market will hang on to any hope it can find," one trader said, referring to hopes among those who want to see the butane market get a further boost.
Saudi Aramco exports around 325,000 mt of butane on average per month, trades sources said.
The UAE's Abu Dhabi National Oil Co. last month cut butane supply by 10% with a loading delay of four to seven days for December-loading LPG cargoes to term lifters, northeast Asian lifters had said.
"In November, ADNOC's butane exports were down to 276,000 mt, so that had a huge impact," one trader said. "ADNOC's average monthly butane delivery during January to October was about 340,000 mt."
Traders said one reason why butane prices firmed up in relation to propane in the past month was due to the shortfall in ADNOC butane supplies for December. The spread between propane and butane narrowed to $10-20/mt, compared with $60-70/mt set in Saudi Aramco's December CP.
With ADNOC keeping its latest term volumes for January shipments steady without any cuts and demand for propane is starting to recover this week after prices slid over the past month, the propane/butane spread has begun to widen again to around $20-30/mt, traders said.
