Chilly weather boosts Asian gas

Asian liquefied petroleum gas (LPG) rose to a record after temperatures dropped in Japan and South Korea, boosting demand for the heating and cooking fuel.

Propane for delivery to Japan gained 0.6 percent to US$895 per tonne, including cost and freight. Butane added 0.5 percent to US$920 a tonne. Oil futures have risen 49 percent this year.

"The steep rise in crude oil pricing is the main driver of LPG prices this year," said Ken Otto, senior vice president at industry consultant Purvin & Gertz Inc. "Lower inventories in some parts of the world, including the US and Japan, have also contributed to some of the recent strength in LPG prices."

Saudi Aramco, the largest supplier to Asia, boosted prices for cargoes loading in December to a record.

The Dhahran, Saudi Arabia-based company increased propane prices by 18 percent to US$860 a tonne from November, and butane by 17 percent to US$885 a tonne.

Inventories of propane in the US, the largest LPG user, were 8.2 million barrels below the level a year ago, Energy Department data showed.

"It's getting colder in northeast Asia," said Hiroki Ito, LPG trading manager at Total SA in Singapore. "That should help boost demand."

LPG inventories fell in Japan, Asia's largest buyer, as imports slowed. The country's imports dropped 2.5 percent from a year earlier to 997,553 tonnes in October, according to data released today by the Ministry of Economy, Trade and Industry. Stockpiles at the end of October were 15 percent lower compared with a year ago at 2.6 million tonnes.

Taiwan

"We're meeting demand with imports and output from our own refineries," said Hou Lingwan (侯玲婉), Taipei-based trading manager at CPC Corp's (台灣中油) LPG business division. "Still, the high cost of importing is a disincentive to keep excessive inventories."

Formosa Petrochemical Corp, (台塑石化) Taiwan's only publicly traded oil refiner, sold a 2,000-tonne cargo comprising 25 percent propane and 75 percent butane at about US$900 a tonne, free-on-board. The cargo will load between today and Dec. 15 from its refinery and petrochemical complex in Mailiao (苗栗).

The refiner offered 2,000 tonnes for loading between Dec. 16 and Dec. 31. Bids are due on Monday. This is the sixth cargo offered by the refiner since early last month.

"The rapid rise in LPG prices is slowing demand growth in many market sectors," Otto said in an e-mailed reply to questions yesterday. "This is particularly true in residential and commercial markets in developing countries where LPG is not heavily subsidized, such as China."

China

China's imports slumped 32 percent to 318,000 tonnes in October from September, according to data from the Beijing-based Customs General Administration.

Competition with local refiners is deterring importers from paying higher international prices, said Phoebe Deng, a gas market analyst at Guangdong Oil and Gas Association (廣東油氣商會).

"Refiners are producing more LPG as they boost output of gasoline and diesel to help ease the fuel shortage," Deng said. "As supply from local refineries increases, importers are finding it harder and harder to remain competitive."

Prices of imported LPG in the southeastern Guangdong Province were little changed from a week ago at 7,880 yuan (US$1,066) a tonne on an ex-tank basis, Deng said by telephone yesterday. Refiners meanwhile dropped prices to about 7,000 yuan a tonne, from 7,350 a tonne a week ago.