Posts Tagged ‘physical commodities trading’

East-West LPG arbitrage is closed with the exception of the USG.

I note that Saudi Aramco’s biggest competitor in the LPG market is now freight with Baltic VLGC spot rate is assessed at $128/mt while Japan/MEG LP spread is below $122/mt.
Freight is rich/a very slow bbq season is priced in the USGC, will be funny to see how things will go.
May/Jun VLGC Seasonality appears fully priced (markets believe that reduced demand will lower prices in the U.S and create arbitrage between east and west).

 

2014/04/23 $/MT Mt Belvieu/".." spread Freight Houston-"…" RV ($/MT) ARB US/".."
JAPAN CHIBA CFR 910 -$335/mt 218 37 $/MT
ARA CNF 768 -$193/mt 84 29 $/MT
Persian Gulf FOB 788 -$213/mt 135 (2) $/MT
Mt Belvieu TX Hub 575

Source: Data compiled from Platts, Argus, Clarkson.

Platts states its LPG FOB assessment for Houston is at +$80/MT over the non-liquid storage tank ex Mt. Belvieu, TX.

2014/04/23 $/MT Persian Gulf/Japan spread Freight Persian Gulf-"Chiba" RV ($/MT) ARB
($/MT)JAPAN CHIBA CFR 910 122 $/MT 128 $/MT (6)
Ras Tanura FOB 788

 Source: Data compiled from Platts, Argus, Clarkson.

What traders and markets will do, take down freight ? LPG fleet owners have an opportunity to lock their rates for the rest of the year at record high.

 What owners will do to lock 1 Yr TC rate ? Surf this wave ?! Conditional to have a loading date in Houston and charter a LPG tanker, an arbutrage is still possible for traders between ARA-Houston and Japan-Houston.  However, spots for LPG cargoes are extremely limited in the USGC. Targa Resources and Entreprise Partners terminals have only capacity for shipping 8 VLGCs cargoes per month each.
Among the reasons for the U.S LPG discounts on world’s markets are the surge of NGLs production from the shale gas drilling and a LPG infrastructure jam-lock in the Gulf Coast.

 

arbitrage

 

The OPIS Swap Futures Curve for Mt. Belvieu is already pricing an easing of the Bottleneck in the USGC for 2015.

 

Mr. Simon Jacques 

Expert on commodities trade and shipping based in Canada, author of The Trade, Shipping and Finance Wizard

 

Physical Traders: Pipeline transportation

Physical traders 55Natural Gas and Oil pipelines differs much in the operational process, even if they look the same on the outside, perform similar service and are governed by same laws of physics. The installation process remains quiet the same, as well as regulatory and social issues such constructions provoke.

We can generally discern natural gas pipelines, crude oil pipelines and refined product pipelines. They are often governed by different nomenclature during the operational process. At the same time operations of oil pipelines, chemical liquids pipelines, natural gas liquids (NGL) pipelines and liquefied petroleum gas (LPG) pipelines are largely alike. Industry classification also distinguish between Crude oil gathering lines and Crude oil main lines among oil pipelines.

Pipeline value chain we can trace back to the oil patch, where physical oil is extracted from underground reservoirs, either in mixed streams or separately. If the strean at the stage of a wellhead is a mixed stream, field separators at the well sites channel it further as an oil and gas. Oil gathering lines are made from 5 centimeters to 30 centimeters pipe. Starting at the production field tank battery which is an aggregation of smaller tanks and then via pipeline (or even a truck) to so called gathering station, aggregation of larger storage facilities.
The gathering station aggregates is a point in a value chain that mix crude from various sources. It is typically situated by a crude oil main line and has a pump facility to inject the crude oil into the main line. Gathering stations might be situated not only at the beginning but also along the main line. Main lines are build from at least 20 centimeters pipes.

What deserves a remark, when the gathering station is build along a main line and if crude oil injected considerably differs in type from the one already flowing, the pipeline can be stopped upstream and a portion of crude can be injected as a separate batch. Then it is being tracked as it goes and can be delivered to separate customers or segregated storage facilities at the designated destination.

Oil is also delivered to the main lines at regional storage tanks and marine off-loading facilities. At the delivery side, pipelines deliver to the range of facilities as mentioned before (in an incjection point “category”). They are also an important source of deliveries to the refining plants.

Physical crude oil pipeline ends at the point of oil refinery and at the next stage transforms into refined products pipeline value chain which ends subsequently at petroleum products terminals, a gathering of large storage facilities near final product’s consumers concentration.

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