Sonatrach and Aramco Cut LPG Prices in Response to Weak Demand and Global Supply Abundance

In July 2023, Algeria's Sonatrach and Saudi Arabia's Aramco made changes to their official selling prices (OSPs) for Liquified Petroleum Gas (LPG). According to reports from traders, both companies decided to reduce their prices in response to weaker demand and an abundance of global supply. This step has reduced LPG prices in Europe and the Middle East Asian countries.

The reduction in OSPs ranged from 1% to 17% compared to the prices set for June 2023. This means that the prices at which they sell LPG to their customers for July are lower than the previous month. This strategic price adjustment reflects the companies' efforts to adapt to market conditions and maintain competitiveness in changing demand and supply dynamics. Overall, the decision by Sonatrach and Aramco to reduce their July OSPs for LPG is a strategic move to navigate the market conditions in the energy sector. By doing so, they aim to stay competitive and meet the challenges posed by weaker demand and an abundant global supply of liquefied petroleum gas.

Although there was a decrease in the past weeks, the transportation of US crude to Europe continued to be robust during the latter half of July. This is mainly due to the high demand for US barrels in Europe and the necessity for US exporters to sell excess light sweet barrels that domestic refineries are not utilizing in the international market. This situation has been a supporting factor for the flow of US crude to Europe. Thus, the ample availability of LPG in the European region has caused the prices to decline. Therefore, the LPG cost in Germany, FD Hamburg declined by 2% in July.

In Saudi Arabia, the price of LPG witnessed a decline after the announcement of a price reduction by Aramco. Further, the Propane and Butane prices depreciated by 11% and 15% in July, which has supported the downturn for LPG prices. Additionally, an excess supply of LPG in the global market has led to price cuts as suppliers may seek to offload their surplus stocks and balance the market. Increased production or lower-than-expected consumption likely contributed to the excess supply scenario in this case.

According to Chemanalyst, in light of the current market dynamics, the prices of LPG are anticipated to decline further in the European and Middle Eastern regions in August. However, the prices may rebound after August as the demand may rise and the global market is expected to boost.