The FOB Houston propane differential has dropped 53% since July 1 as increasing exports and falling international propane prices narrow the arbitrage out of the Gulf Coast.
Platts started assessing FOB Houston propane cargoes on July 1 as both a differential to the Mont Belvieu propane assessment and as a flat price.
The differential, which is a gauge for the arbitrage to international markets, was talked at $20/mt on Monday.
The propane arbitrage out of the Gulf Coast was around $500/mt this time last year, a Gulf Coast source said.
Marginal propane exports out of the Gulf Coast increased on September 10 with Targa loading low-ethane propane onto a VLGC at its Houston Ship Channel export facility.
Targa plans to load one more VLGC before the end of the month, according to a recent presentation. From October onward, Targa has contracted four VLGCs per month, those are roughly five to 550,000 barrels of propane or butanes to be exported in addition to the million plus barrels that Targa has loaded on a regular basis of HD-5 or butane in smaller ships.
Enterprise Products Partners increased the loading rate at its own Houston Ship Channel facility in the first half of 2013 to a loading capacity of up to 15 VLGCs per month.
Meanwhile, international propane prices have dropped toward the US propane price over the past month, helping to narrow the price differentials.
Propane in Northwest Europe is feeling the pressure of the arrival of product from outside the region as well, sources said late last week.
Delivered Northwest Europe propane cargoes were talked relatively flat from Friday's assessment of $747/mt. However, the talked value was $113/mt lower than early September.
US cargoes were reported heading to Europe, with arrival expected at the beginning of next month.
Platts cFlow software showed that several VLGC vessels that had loaded in Houston were en route to Northwest Europe. The Kobai was due in Flushing on October 9, the Ronald N was due in Terneuzen on October 3 and the Hellas Argosy was due in Flushing on September 30.
Petrochemical buyers in Europe have taken some of the pressure off the European propane market, by opting for propane instead of the more expensive naphtha and butane.
"Propane will stay in the cracking pool all winter," a trading source said.
But outside of Europe, demand has been weak, with buying in Asia subdued due to cracker maintenance season.
Asian traders recently said supplies have been plentiful and regional buyers have bought in advance.
The price of propane cargoes for delivery along the Singapore-Japan route 30-45 days forward was assessed up $3/mt from Friday to $853/mt. However, propane for delivery along the Singapore-Japan route 30-45 days forward has dropped $86/mt over the past, Platts data showed.
Other than the US supplies, Asia has also seen more supplies from Iran in recent months, which went mainly to China and also bought by South Korean traders, sources said.
