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
It’s been a long time since I’ve seen something rather unusual start to occur, especially as far as the direction of trade is concerned for LPG cargoes. I’m intrigued with what appears to be a new phenomenon emerging from the east coast of the U.S., but it doesn’t stop there. In fact, it appears to be the catalyst for a chain of events, that we might end up see happening on a regular basis.
As the geo-political world enters that post incident period of claim and counter claim, the markets are trying to gauge what this means for numbers, the direction is clearly up. But there seems to be discomfort or even distress, trying to work out how far prices could move up, and how long this will all last, not just until we get to know the true extent of the damage, but also how long it’s going to take to repair.
The power struggle in the Middle East may well have taken a new and more immediate twist, potentially sending huge shockwaves through the oil markets once the weekend is over and electronic trading commences Sunday evening. As a result, the whole international LPG complex faces a major jolt, not only on the back of any spike in crude oil pricing but also potentially as a result of production cutbacks in Saudi Arabia.
In the last 10 years imports have jumped from 2.5 million Mt to over 12 million Mt today, but the early imports were in smaller cargo sizes as the import terminals were pretty spread around the country’s coastline, near to major cities, with a slant to the west coast given its proximity to Middle East supplies.
With a population growing so quickly, and the prospects for real growth in disposable incomes, generated by stronger Gross Domestic Product (GDP) numbers, LPG demand looks sure to follow. Both the World Bank and the IMF are forecasting over 7% growth this year and next, and even with some impact from world trade issues, the lowest number I’ve seen recently is a 6.7% growth rate.
I struggle sometimes when it comes to the Indian LPG market, especially explaining its true impact on the international seaborne trade. I think it mainly comes from spending far too long away from the LPG industry, just as India was starting to thrive, and then coming back to trading models geared predominantly to U.S. exports and FEI pricing, neither with any focus on India.
There’s been a feeling of calm in the shipping market in recent weeks, with ship-owners in a relatively ebullient mood for once, rates holding from the U.S. to Chiba in the low $100s/ Mt, and despite a few trials and tribulations, Ras Tanura to Chiba, since reaching its peak of $80/ Mt in late June this year, is still comfortably sparring with the $60/Mt levels.