Saudi Aramco's Steady Hand Guides China's LPG in December 2023
Saudi Aramco's Steady Hand Guides China's LPG in December 2023

Saudi Aramco's Steady Hand Guides China's LPG in December 2023

  • 15-Jan-2024 2:32 PM
  • Journalist: Patricia Jose Perez

LPG prices in China remained unchanged during December 2023 after the announcement of stable prices of the commodity by major players. A rare moment of stability emerged in December with Saudi Aramco's decision to maintain its Official Selling Prices (OSPs) for liquefied petroleum gas (LPG) unchanged from the previous month. This seemingly simple move resonated throughout the Asia Pacific region. By choosing to hold the line on prices, Saudi Arabia, a key player in the market, kept their prices unchanged. This stability proved particularly significant for Asian nations heavily reliant on imported LPG for cooking, heating, and industrial applications. The LPG futures market in December presented a contrasting picture. The first half saw a strong and volatile trend, reflecting lower-than-expected combustion demand due to warmer-than-usual temperatures. However, the latter half showed a rebound driven by rising optimism around PDH (propane dehydrogenation) plant operating rates and the arrival of a cold wave across the country.

The end of December 2023 brought a rare moment of stability to China's LPG market, defying expectations in the face of several bearish pressures. This unexpected stability was attributed to a key turning point came in early December when Saudi Aramco, a major player in the global LPG market, announced it would maintain its Official Selling Prices (OSPs) for LPG unchanged from the previous month. While a general downward trend in crude oil prices throughout December negatively impacted related products like propane, it also indirectly contributed to LPG stability. Lower propane prices narrowed the gap with LPG, reducing the incentive for immediate switching and supporting overall market equilibrium. Despite, temporary slowdowns due to port congestion, upstream production of LPG remained consistent throughout the month. This steady supply, coupled with lower demand from consumer sectors, created a situation where supply slightly outpaced demand, preventing significant price fluctuations.

However, the seasonal weather disruptions in China due to snowy conditions towards the month's end disrupted transportation in some areas, restricting cargo flow and potentially contributing to stabilizing prices. This disruption, while causing temporary inconveniences, ultimately acted as a brake on any potential downward price spirals. A combination of low-profit margins in the chemical industry and weak entry enthusiasm from downstream players further dampened demand for LPG. This subdued demand, alongside the other stabilizing factors, prevented any significant price movements in either direction.

As per ChemAnalyst, as we move into 2024, the LPG price in China is expected to remain at a higher end due to the recent announcement of Aramco to maintain its Official Selling Prices (OSPs) slightly higher than the previous segment.

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