Saudi Arabia LPG Prices Climbs-up, Contrary to Europe, Showing a Drop Entering November 2023

The global Liquified Petroleum Gas (LPG) market displayed mixed sentiments in the initial half of November 2023, influenced by fluctuations in Crude oil prices and demand dynamics. The cost of LPG in Asian and Middle Eastern countries increased due to Saudi Arabia's Aramco raising prices, while European LPG prices declined amid pessimistic demand sentiments due to weakening economic conditions. The geopolitical tensions between Israel and Palestine are anticipated to further affect market dynamics. Further, concerns have arisen about transportation through the Panama Canal due to low water levels in Gatun Lake, potentially leading to increased freight charges.

During the initial week of November, there was a significant increase in LPG prices in Saudi Arabia, and these prices have remained steady throughout the first half of the month. Saudi Arabia’s Aramco raised the official selling prices (OSPs) for LPG in November by 1-2%, marking an adjustment from the prices in October 2023, which can be attributed to the rising demand. In contrast, Algeria's Sonatrach decreased the OSP for butane by 6% in November due to reduction in a response to the increased supply of butane to the Mediterranean region during the same period. Market participants have reported that this adjustment is a reaction to the heightened demand and a constrained global supply of LPG. 

In the initial half of November, LPG prices in Europe experienced a decline. However, the price trend for the later part of the month is expected to be subject to fluctuations depending on Crude oil prices and product demand within the domestic market. Despite the increase in LPG prices by Middle Eastern countries, the European market has been influenced by sufficient stock and lackluster demand, particularly due to declining economic conditions. Further, the imported costs of LPG from the United States have been low, reflecting a decline in prices in the USA attributed to reduced demand. Furthermore, upstream Crude oil prices have witnessed a decline, driven by weaker demand from the USA and Europe. Moreover, Europe has not come out of the possibility of a recession, marked by a swift tightening of monetary policy and significant economic challenges. This combination of factors is creating a challenging economic environment in Europe, impacting the demand for LPG in the region.

According to ChemAnalyst, LPG prices are projected to stay elevated in November in the Middle East and Asian markets. However, an anticipated decline is foreseen in December 2023 due to subdued demand and sufficient stock in the regional market. Meanwhile, European LPG prices are expected to rebound as a result of potential strengthening in Crude oil prices, which may lead  to increased cost pressure on the product. Further, freight charges are expected to remain high due to supply disruptions in the Panama Canal. The challenging economic conditions may further influence the global demand for LPG and impact the prices.