There is one thing for certain about the production of LPG in the world, and especially in the U.S., it’s the fact that LPG just doesn’t call the shots, it never has. Therefore, any reliability in future LPG production numbers lays very much in the hands of the oil and gas producers, especially those that have led the U.S. shale revolution over the last decade.
In yesterday’s SIMON SAYS we started to explore the Saudi Aramco Contract Price (CP) and asked the question “how do parties really make money from CP related contracts out of the Middle East?” We went a little way down memory lane, but what seemed to be the answer, maybe not the only answer, lay in the end year activities, both calendar and fiscal, of the Japanese LPG importers and the value of the product they hold in storage.
I’ve always found it difficult to understand how on earth anyone makes money with an LPG purchase deal based on Saudi Aramco’s Contract Price (CP). In fact, I’ve rarely found anyone else who knows how it’s done either. But around this time of year, every year, CP becomes the talk of the market, as if it possesses this mesmerizing draw, sucking in believers and non-believers by the score.
It really seems as if the LPG market has tried to move towards a greater degree of homogeneity in recent years, especially in the face of a market that has become far more multifaceted, truly global, more transparent, and increasingly influenced by corporate performance, in relation to stock market valuations. But I think the complexities and differences are far more exciting!
It has to be over twenty years ago since I last set foot in Taiwan, and I must have met with both CPC and FPC, but my memory pretty much stops there. I do, though, remember visiting a company called LCY Chemicals, I don’t think they have been featured in the LPG import business into Taiwan since, but they did have an import facility in Zhenjiang, China, but only for smaller pressurised LPG cargoes.
There’s nothing that makes a ship owner smile more than seeing a decent number of ships getting fixed in the market, of course the grin widens if the rates are also edging up, and if the levels are jumping up, well I’ll leave that one for you to decide. As all eyes last week were focused on the consequences of the drone attack at Saudi Arabia’s key crude oil processing facility in Abqaiq, charterers hesitated for a while, but not for that long.
Yesterday I explored the implications for LPG as a result of last week’s drone attack on the Abqaiq crude processing facility in Saudi Arabia, that the damage is probably far greater than has been explained so far, and that Saudi Arabia’s current focus is on security, crude oil and the impending IPO of Aramco.
The start of last week was all about crude oil, geopolitical issues in the Middle East, and the usual ups and downs of the energy markets. We kept an eye on what levels crude oil prices reached or fell to, adjusting LPG prices accordingly, but it was easy to get sucked-in to the big picture, and maybe not get the LPG portion into a proper perspective.
Wow, it does feel as if it’s been a very long week, the drone attack in Saudi Arabia probably caught you and me napping at the weekend, then crude went up on Monday, crude went down on Tuesday, I’ve had a really enjoyable trip to Stavanger in Norway, which included a lovely dinner in a huge converted tomato greenhouse miles away from anywhere, and was owned by a lady that probably spoke for longer than I did during my afternoon presentation…well not quite, and