Summary
The US LST vs Far East propane (LST/FEI) arb weakened to -$220/mt this fortnight after initially rallying to -$200/mt at the start of the month. This weakness came despite LST/FEI buying, highlighting weakness in US LST propane. This weakness was likely exacerbated by a significant build of 2.151mb reported by the EIA in the week ending 05 June. The week ending 12 July saw another build of 4.627mb.
Open interest across the LPG complex continues to be concentrated in the Q4’24 tenor, with the OI in the Q4’24 LST/FEI now 102% above its 5-year average of 3.3mb. However, the Q4’24 propane East/West sits at 7.2mb,28% below its 5-year average.
Freight prices have declined this week, which lent support to the Saudi CP propane.
Finally, looking at correlations in the prompt across the LPG contracts, the correlation between US propane and butane has shifted from slightly positive to negative w/w, while both FEI and CP propane are now negatively correlated with LST propane.
