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LPG-carrying vessels are piling up off the coast of Singapore as traders await higher prices, Reuters reports, citing industry insiders. According to tanker tracking data from Thomson Reuters, there is currently one Very Large Gas Carrier loaded with LPG off the Singapore coast, and it has been floating there for five days. Another VLGC, the sources told Reuters, recently set for China after floating for a few days in Singapore waters.
Last August, as many as 10 vessels loaded with LPG sat floating off the coast of Singapore for months due to an oversupply of the commodity, which is used for heating and cooking, as well as for the production of petrochemicals. However, Reuters notes, this time last year the LNG market contango was US$15 while now it is just US$2, so there isn’t so much motivation for hoarding.
This year, demand, especially from China and India is stronger. In March, Platts cited Sinopec, China’s biggest refiner, as saying that LPG imports into the country this year could hit 20 million tons on strong demand for petrochemicals. Apparent demand for LPG may reach 54.5 million tons. Last year, the apparent demand for LPG in China rose 26 percent on an annual basis to 49.84 million tons.
In India, a news report from this month said that local production of LPG is falling short of demand for cooking gas, so the government was seeking ways to ensure sufficient supply from abroad. Earlier this week, India inked a contract with neighbor Bangladesh for the construction of an LPG import terminal at the Bangladeshi port of Chittagong. In addition, India will receive 44,000 tons of LPG from Iran every month until the end of the year with an option for an extension of the supply period.
A Kpler LPG market analyst said that they are witnessing a higher number of VLGCs taking the longer route to Asian markets, via the Cape of Good Hope instead of the Panama Canal, possibly buying more time in hopes the contango keeps or increases. Last week, the analyst noted, seven VLGCs headed to the Far East via Singapore, and this week three more have signaled for Singapore on their way to Asia. This increases the possibility of a buildup in Singapore in the coming days.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.