Stable LPG Prices in Saudi Arabia, Slight Uptick in European Market for December 2023

The global market for Liquified Petroleum Gas (LPG) exhibited a varied pattern during the first half of December 2023. While prices for LPG remained steady in Middle Eastern nations, there was a moderate increase in European countries. The pricing strategies for LPG implemented by Saudi Arabia's Aramco and Algeria's Sonatrach impacted prices in the Middle East and Asian regions. In Europe, the combination of decreasing Crude oil prices and a generally pessimistic market environment has affected the demand for LPG. Nevertheless, prices have shown an upward trend, influenced by elevated freight rates and firm demand. The ongoing geopolitical tensions between Israel and Palestine are expected to affect market dynamics further. Moreover, concerns have arisen about transportation through the Panama Canal due to low water levels in Gatun Lake, potentially leading to a change of routes and impacting freight charges.

The LPG prices in the Middle East remained steady for the initial half of December 2023 as Saudi Arabia's Aramco has decided to keep the Official Selling Prices (OSPs) unchanged in December 2023. Meanwhile, Algeria's Sonatrach has decreased the OSP for Propane by 7% this month. These price adjustments were made due to the decline in demand in the global market. Further, the continuous decline in Crude oil prices has impacted market dynamics. Also, amid declining Crude oil prices, several OPEC+ nations have reached an agreement to implement voluntary reductions in oil production, amounting to a collective cut of 2.2 million barrels per day during the initial quarter of 2024. Saudi Arabia, the largest global exporter of crude oil, will head this initiative by extending a voluntary reduction of 1 million barrels per day, originally scheduled to conclude at the end of December. Furthermore, market sentiment has turned bearish due to concerns about sluggish global economic growth, especially in China, which has influenced the price trajectory in Saudi Arabia in this timeframe. On the supply side,  LPG has been stable in the domestic and international markets, while a steady consumption rate has been observed in the downstream industrial and household sectors. Moreover, the supply disturbances can be observed amid geopolitical tensions amid the Houthi rebels' threat in Yemen to impede the passage of ships connected to Israel through the shipping lanes in the Arabian Sea and the Bab al-Mandab strait, linking the Red Sea with the Gulf of Aden. The vessel's capture will signal shipowners traveling through the Red Sea that war risk premiums will likely increase. The heightened disturbances from the Houthi group might affect shipping insurance, even if the conflict is currently limited in scope. These factors may impact the price of LPG overall in European markets.

During this timeframe, European LPG prices experienced a moderate increase, continuing a trend observed in November, influenced by the pricing strategies of Saudi Arabia's Aramco and Algeria's Sonatrach. LPG experienced a surge in civilian demand prompted by the onset of winter, contributing to a steady rise in demand that supported the market. Additionally,  Europeans experienced relief as inflation decreased more than anticipated to 2.4% in November, as per Eurostat, marking the lowest rate in over two years. This decline was attributed to a significant drop in energy costs, alleviating the cost-of-living challenges.

According to ChemAnalyst, LPG prices are expected to remain stable in the Middle East region throughout December. However, a projected increase is anticipated in January 2024 as demand is expected to rebound domestically and internationally. In contrast, European LPG prices are predicted to experience a moderate decline by the end of the current year. Nevertheless, a positive market outlook for LPG is foreseen for January 2024.