Sonatrach and Aramco's Price Hike Impacts LPG Prices Globally in September 2023
- 04-Oct-2023 3:43 PM
- Journalist: Nicholas Seifield
In September 2023, global Liquified Petroleum Gas (LPG) prices experienced a significant increase due to the decisions made by Algeria's Sonatrach and Saudi Arabia's Aramco to adjust their official selling prices (OSPs) for LPG and implement a 13-22% price hike in September 2023 compared to August 2023. Consequently, this move increased LPG prices in the Middle East, Europe, and Asian nations. Furthermore, the demand for LPG in the United States was influenced by an increased demand for the product from the Asian market.
Saudi Arabia witnessed a price surge for LPG in September 2023 as reports from traders indicated that both companies raised their prices in response to the surging Crude oil prices and the limited supply of LPG worldwide. Further, the increasing demand for LPG, commonly used as a heating and raw material in petrochemical processes, also contributed to the price surge. During this month, Saudi Arabia saw a 14% rise in Propane prices and a 17% increase in Butane prices, paralleling the surge in Crude oil prices.
In the United States, LPG prices increased by 3% due to growing demand from the Asian market. This heightened demand was primarily driven by the need for Propane, which is supplied to Asian Propane Dehydration (PDH) plants to produce polypropylene, a key material in plastics manufacturing. The availability of more LPG for export in both the U.S. and the Middle East has led to an increase in the construction of PDH plants in Asia, resulting in a greater price disparity between Propane and naphtha.
Furthermore, disruptions in the supply chain were observed in the Panama Canal, which is a critical route for LPG shipping, particularly for major LPG trades between the U.S. and Asia. Congestion and delays in the canal, especially during these months, have caused significant inefficiencies in trade, resulting in higher shipping costs and commodity prices. The current restrictions, accumulation of waiting vessels, and higher canal transit fees have prompted ship owners to consider using the Suez Canal, especially given favorable price differentials between the U.S. and Asia and the recovery of the Asian petrochemical sector. Despite signs of weakening demand in Asia, the constraints at the Panama Canal have stabilized the market, with shipping rates continuing to rise.
As per ChemAnalyst, the price of LPG may rise in the coming months amid increasing global demand and a surge in Crude oil prices due to production cuts by OPEC+ countries. Further, the price adjustments for LPG made by Algeria's Sonatrach and Saudi Arabia's Aramco may influence the prices globally.