Propane recently set a new monthly open interest (OI) record in June with 218,000 contracts outstanding. OI is a useful measure of total outstanding positions or open commitments in a delivery month. When looking at the average monthly open interest (AMOI), all CME Group LPG and petrochemicals products grew 40% YoY from 2015 to 2016. In 2017, AMOI dropped slightly -6% YoY. Through the first half of 2018, AMOI for the group was flat YoY; however, new highs were reached in Propane in June and in Natural Gasoline in May. (Summarized in the following table below)
| Propane | 196,783 | 168,028 | 17% | 217,997 | 18-Jun |
| Butane | 47,317 | 51,584 | -8% | 57,622 | 17-Nov |
| Natural Gasoline | 21,230 | 13,650 | 56% | 24,720 | 18-May |
| Ethane | 49,921 | 82,618 | -40% | 112,079 | 17-Jan |
| Ethylene | 4,348 | 4,219 | 3% | 7,807 | 16-Jun |
After a record 2016, and a slight dip in volumes in 2017, annual average daily trading volume (ADV) in 1H18 exceeded 2017 volumes by 22% YoY, and on track to set new records by year-end for the combined group. Butane and Natural Gasoline products have increased 21% and 20% respectively YoY, and 1H18 ADV increased 44% YoY for Propane. A new record was reached in total monthly volume for Propane futures and options products with over 200,000 contracts traded in January 2018. The following table highlights 1H18 ADV for select product groups.
| Propane | 8,203 | 5,678 | 44% | 202,395 | 18-Jan |
| Butane | 1,481 | 1,219 | 21% | 47,462 | 16-Sep |
| Natural Gasoline | 447 | 371 | 20% | 22,057 | 17-Dec |
| Ethane | 962 | 1,406 | -32% | 85,874 | 16-Sep |
| Ethylene | 107 | 98 | 9% | 6,435 | 16-Sep |
LPG products have seen increasing participation, particularly in Propane futures and Normal Butane futures (code: B0, D0), as indicated in the CFTC weekly Commitments of Traders report. Total Large Open Interest Holders (LOIH), a proxy for overall market participation among firms holding reportable positions, reached 442 OI holders on the last reportable date for 1H18. Additionally, Mt.B. LDH Propane futures (B0) has averaged 116 OI holders in 1H18 vs. 105 OI holders in 2017, and Mt.B. Normal Butane futures (D0) averaged 69 OI holders vs. 61 OI holders in 2017. Recent new highs were reached in the following futures contracts:
- Mt.B. LDH Propane futures (121 holders Dec-17)
- Conway Propane futures (51 holders Jan-18)
- Mt.B. Non-LDH Propane futures (55 holders Jun-18)
- Mt.B. Ethane futures (53 holders Dec-17)
- Mt.B. Normal Butane futures (78 holders Dec-17)
| Mt.B. Propane LDH (OPIS) | B0 | 105 | 119 |
| Mt.B. Propane Non-LDH (OPIS) | 1R | 40 | 55 |
| Conway Propane (OPIS) | 8K | 38 | 50 |
| Argus Propane Far East Index | 7E | 27 | 31 |
| Mt.B Propane LDH BALMO* | 😯 | 24 | 23 |
| Mt.B. Notm Butane (OPIS) | D0 | 61 | 73 |
| Mt.B. Ethane (OPIS) | C0 | 46 | 51 |
| Mt.B. Nat Gasoline (OPIS) | 7Q | 38 | 40 |
| Total | 379 | 442 |
Source: CFTC Weekly Commitments of Traders Reports
*last reported 29 May 2018
The first half of 2018 has shown increasing liquidity in all three measures (open interest, ADV, market participation), as highlighted with new record highs across the various groups in LPG. Given new supply and demand fundamentals in the global propane market, the Propane futures and options product group is setting new records in every category. The relative overall strengthening of liquidity across the LPG group should encourage new entrants, and as new highs in open interest and volume continue, we should see more opportunities for participants to cost effectively manage risk throughout the remainder of 2018.
Read original article: https://cattlemensharrison.com/liquefied-petroleum-gas-lpg-liquidity-update/
By: CME Group