I still believe that if you have any serious intentions to be a player in the LPG world, you need a ship, whether you own it or charter it doesn’t really matter, all that counts is that you have one. Now a lot of people will remind me that the market has been on its knees many times over the last ten years or so, and for many periods before that, and isn’t this just me trying to ride the wave of the current strength in the freight market.
It’s looking as if it’s been another one of those weeks in the LPG world, where defining a forward view of the market could go one of many ways, and the backcloth is an ARB market that initially headed south but has now regained some broader momentum. In today’s SIMON SAYs I’ll take a look at what the key indicators are up to, and what has happened to them over the last couple of weeks, to see if there’s a clearer direction going forward, as cargoes are starting to be talked for the January 2020 arrival period in Asia.
On Friday I decided to try and explain what lays behind the EIA’s weekly inventory numbers, the numbers they know, and the ones they don’t. Although there is a degree of uncertainty regarding production, at least there was a number we could decipher, as there also was for imports and exports, but that’s about where it all stopped. I mentioned we had to make a lot of assumptions, the biggest one being U.S. domestic propane demand. Are we getting it right or wrong?
Over the last few weeks I’ve run a couple of blogs, as part of RBN Energy’s hallowed daily energy post, covering how the ARB works, how it relates to a physical cargo loading out of the U.S., and destined for Asia, and at nearly the same time as today’s SIMON SAYS hits the newsstands, a third blog will be posted that explains such glorified terms as the Argus FEI, the “Ginga” window and the standardized “Ginga” contract. Rusty and a few of the guys in Houston, and beyond, have then translated what I have said into good ole American lingo, and a fine job they’ve done too!
However much we like to try to put crude oil and natural gas prices in the back of our minds, mainly because none of us really know enough about them, they are still the catalyst for what happens next in the LPG space. Today I explore what’s probably going on in the heads of those oil and natgas players, as they assess what’s going to happen next, and what will be the driving forces. Whether it tells us any more than we already know, or directs us in a certain path on LPG, well we have to wait till I get to the end.
I bet some of you are saying that all I seem to talk about these days is that damn ARB, from Houston to Chiba, but to soothe any sore feelings I’m going to explain a little more about the direction of seaborne trade. Not just the route from the U.S. to Asia, however important it might be. We’ve all seen the world maps with those directional arrows, and in a nutshell that’s pretty much what it is all about. Whatever anybody says you can’t beat a good world map!
The beauty of the U.S. NGL market is that it’s full of statistics, in fact, America does statistics very well, just take a look at American sports and you’ll see why. With so many numbers to digest in the NGL world, it tends to draw our attention to the U.S. more often than not, maybe too much. Not surprisingly it does influence what I see and think, and I’m starting to believe the U.S. has taken over as the driving force of the whole international market.
You just can’t get away from the whims, the urges and the impulses of the LPG market, in yet another week of changes, that have quickly moved the industry goalposts, bringing yet more uncertainty back into trader’s minds. While the market seemed to be drifting along with nice wide ARBs, as Asian and U.S. prices pushing apparently in the same direction, i.e. up, it seemed a good time to get my postal vote ready for the upcoming UK Election, yet another chance to tick the “Raving Monster Looney” box on the ballot form, the problem this time is going to be which one will get my vote!
It’s a bit like trying to find a red bus on London’s Oxford Street when you really need one, just when the market could have done with a few extra LPG cargoes appearing from the U.S. Gulf, as well as more clarity on when new midstream and export expansion capacity was about to arrive, nothing much happened, but the clock keeps ticking, and with the blink of an eye we will be seeing in the New Year, 2020. It looks to me as if all those red buses are going to arrive pretty much all at once, but will we have enough passengers, or in our world, NGL production, to fill the bus up.
In yesterday’s SIMON SAYS I told the post shale story for U.S. LPG exports, especially those from the U.S. Gulf coast, and how once everybody had signed up to buy at high terminal fees, the bottom suddenly caved in on the market in the summer of 2016, and it was here to stay for longer than anyone ever wanted. The result was that Chinese end-users began to cancel, or try to renegotiate their term contracts, as they could take advantage of cheaper Middle East product and discounted naphtha. That’s putting it kindly, what was really happening was wholesale reneging!