August is probably the worst time for markets to get the jitters, the players are away, and any move ends up being exaggerated beyond every normal expectation. We’re all a bit worried at the moment about “demand”, the world macro-economic type, and the lack of LPG buyers in Asia, Europe, pretty much everywhere. The uneasiness is made worse for all of us in the LPG world, as the two are very much related, whether we like it or not.
It’s Friday, it’s summer, so we can’t be too serious today, especially having covered the enormous subjects of natural gas, ethane, monochlorodiflouromethane, and the Panama Canal in just one week of SIMON SAYS. So, I thought we would look at what makes the perfect LPG trader, of course knowing that the word “perfect” and “LPG trader” get rarely used in the same sentence let alone!
One significant piece of the U.S. LPG export puzzle, taking something of a back seat behind record LPG production, NGL takeaway problems, lack of pipelines, fractionation constraints, Mariner East 2, export terminal expansions, IMO 2020 and the strong VLGC market, to name but a few, is the Panama Canal, which will have to come more into focus, it’s just a matter of time!
I used to love the logistical side of LPG trading, fascinated by how many different types of cargo an LPG vessel could actually carry. Of course, there are different types and sizes of LPG vessels, from smaller pressurised to semi-refrigerated of different sizes, semi-refrigerated generally bigger than pressure ships, but not as big as fully refrigerated vessels, that go all the way up to Very Large Gas Carriers (VLGCs).
We looked a little closer yesterday at what’s driving the natural gas market down, revealing how production was racing away, whilst demand keeps waiting for some consistent hot weather to arrive across the U.S., to start cranking up the air-conditioning units, increasing electricity demand which is heavily fueled by natural gas, and adding some strength to a price that has fallen apart in recent weeks.
Right now, every seller in the U.S. natural gas market is yearning for hot weather, as hot as possible, not because they are looking for a last-minute holiday booking with the family, but because they want to see air conditioning units working at full pelt. In the U.S. they call it cooling demand, and if we don’t see something more positive on the demand side really soon, I’m afraid natural gas prices are going to continue their slide.
If you were to ask me what is the most important attribute to have in LPG trading, I would say without question it’s momentum! Not too far behind it would come confidence, size, risk appetite, assets, people, reputation and a special courage, some may say foolhardiness. Without doubt none can be taken for granted, they are all inter-related and are constantly changing.
I remember arriving at Getty Oil’s guest accommodation, part of a larger compound situated in the Neutral Zone, a sector of 2,250 square miles of land between Kuwait and Saudi Arabia, where Texaco were producing oil from their concessions in the Wafra, South Fuwaris, and South Umm Gudair oil fields.
In yesterday’s Part I SIMON SAYS I discussed the current international pricing dynamics stemming from the supply/demand fundamentals which have been somewhat different this year versus recent years. Specifically, how the lack of contract cargo cancellations have impacted Year-on-Year storage excesses in the U.S., the need to move greater volumes of exports, mostly to Asia, but also to Europe as Marcus Hook exports have ramped up, and this extra U.S.