For the Quarter Ending June 2022
In May, the spot price of Brent crude oil averaged $113 a barrel. Due to the high weather conditions, the demand for LPG rose as fuel for cooling equipment. The demand hike in the second quarter forced them to use the LPG saved for the winter, ultimately increasing the price of LPG in the American market. Low oil inventory levels at the moment increase the risk of oil price volatility. The degree to which current sanctions against Russia, potential future penalties, and independent business actions affect Russia's oil output or the sale of Russia's oil on the international market will primarily determine the actual price consequences.
The price of LPG dropped throughout the second quarter of 2022 in the Chinese market; the domestic demand was poor in April due to various lockdowns and restrictions to curb the resurgence of Covid-19. Despite good local production, China artificially lowered domestic market prices by importing from the Middle East. Post-April, the prices of LPG in China dropped further due to a substantial supply of upstream Crude oil from Iran and Russia. Many countries in the West have banned imports of Russian and Iranian crude, abetting the decreasing price trend in the Asian markets. The price of LPG at the end of Q2 2022 in China and India was USD 1014/MT and INR 97050/MT, respectively.
During Q2, the LPG price was around EURO 157.874 per barrel in German. The cost of LPG was rising in European markets during April owing to the ongoing war between Russia and Ukraine. Post-April, many European markets witnessed slight ease in LPG prices due to steady supplies from Algeria and Middle Eastern Countries. Saudi Arabia and Algeria, both of these countries, provided discounted oil supply to Europe during MAY, which dropped the price trend of LPG in European markets. The price started to rise again during JUNE due to high inflation rates, and increased fuel demand assisted the rising trend.
For the Quarter Ending December 2021
The US exports of LPG to Asia had been higher overall throughout the second half of FY21 were higher than the exports to Europe by more than a 100%. The export prices of propane assessed on an FOB Texas basis were at a seven year high of around USD 1.5/gallon. Exports to both Asia and Europe increased from the October levels as many Industries in Europe resorted to buying LPG stock from the open market in December owing to sharp increases in natural gas prices. The FOB Texas prices’ discount to CFR Far East Asia narrowed to around USD 160/MT by the end of December. Many refiners in Asia are likely to choose propane over naphtha as the preferred cracker feed for Q1 as crude and natural gas prices will likely rise further during the month of January.
The prices are expected to rise further in Q1 of FY22 as the European market sufficiently tightens with winter demand propelling more LPG imports into the European countries. The US – NWE arbitrage will likely reopen by the first or second week of January as per ChemAnalysts assessment.
Asian LPG demand revived during Q4 of FY21 after lagging for almost entire period of Q3. As the premium to naphtha started declining since October, the arbitrage for US imports of propane reopened for a short while during the month of October before tapering off due to huge demand from Asia owing to an energy crisis that started somewhere to the tail end of October. Propane’s premium to butane had tapered off by the closing weeks of December as demand for Asian Butane for US gasoline blending industry increased during the winter.
Indian LPG demand had come to a stagnation by the end of Q4 of FY21 as contract prices had reduced by 17% from the October record high of USD 970/MT. Although Propane dehydrogenation capacity ad been increasing every year in Asia, naphtha continued to be the preferred feedstock for the quarter ending December as there was no significant reduction in LPG’s premium to Naphtha. With provincial elections around the corner in Q1 of FY22, LPG demand in India is expected to increase as incumbent governments usually announce subsidies on LPG for domestic use before the elections in a bid to woo the electorate.
European LPG imports from the US hit half yearly high of 0.42 Mn tons in November of Q4 and the growth in imports only increased substantially by December which is over 240% higher compared to the December FY20 levels. US export prices at the start of Q4 were at record high levels rendering the arbitrage margins impossible for the traders in Europe. The prices however came down by December and are expected to propel the European LPG demand for the first quarter of FY22. The peak winter demand is expected to be less than that of FY21 January. However, the prices of LPG are expected to go up as the demand for LPG as a heating fuel substitute for natural gas owing to a sharp increase in natural gas prices is highly likely.
For the Quarter Ending September 2021
Constant surge in the prices of LPG was witnessed in the North American region during Q3 2021. LPG market outlook showcased an upward trend due to the spike in the feedstock values. In addition, the arrival of Ida hurricane in the Gulf Coat of USA, compelled manufacturers to shut their oil and gas production plants and refineries as a part of contingency plan for almost two weeks that consequently declined the inventory levels of LPG. In addition, sturdy demand was observed from the industrial and household applications throughout the quarter that supported the pricing trend of LPG in the region. It is anticipated that the prices of LPG would further propel in the upcoming quarter following the onset of winter season as the US depends on LPG as their heating fuel.
In Q3 2021, an exponential spike in the prices of LPG was witnessed in the Asian markets backed by surging demand by the downstream sectors and volatility in the values of upstream. In addition, rigorous efforts by different countries in the region to curb extreme energy use and to reduce the carbon emission further prompted petrochemical makers using LPG as feedstock to adjust run rates which consequently pushed the demand of LPG. The constraint availability and surging demand for LPG contributed to hike the prices of Liquefied Petroleum Gas. In India, as a major share of the LPG gas is imported positive revision in the prices of LPG by SABIC in the last week of all the three months in this time frame that further fueled its prices in the region. EX-Depot Mumbai prices spiked from USD 630.37/MT to USD 883.72/MT during this timeframe.
In Europe, the LPG market witnessed a constant uprise in the pricing trend during the third quarter of 2021. Increment in the values of LPG was backed by constraint supplies due to lower imports from the USA and other regions. Moreover, other factors like high freight charges, shortages of containers and the crisis of natural gas also contribute to the inflation in the prices of LPG in the region. Additionally, the values of LPG will be pushed further in the upcoming months as the demand surges in the winters across the region.
For the Quarter Ending June 2021
The North American LPG market continued to rally upwards throughout the second quarter after observing a marginal downfall during the first half. Continuous strengthening of the brent Crude Oil maintained kept the offers considerably raised. Brent Crude oil prices were averaged at USD 73 per barrel in June with an increment of USD 5 per barrel from the prices in May. Demand was consistent from the household applications, whereas recovered industrial infrastructure in the US Gulf region surged the offtakes for the industrial purposes. Prices in the US market consistently improved throughout the quarter with quarterly average of LPG prices assessing at USD 221 per tonne, showing an increment of USD 16 per tonne in the second quarter of 2021.
As the winter season ended in the Asia pacific region, LPG demand slowed comparatively to the previous quarter due to lesser heating demand with the arrival of the summer season. However, increasing focus over the industrial, household applications and for the electricity generation (specially in Japan) backed by recovering trade dynamics supported the material availability. Softening North Asian heating demand ahead of summer and healthy supply to Asia from the US and Middle East in June. Saudi Aramco’s contractual prices of Propane and Butane in June were assessed around the range of USD 500-515 per tonne and USD 495-510 per tonne, with an increment of USD 20-35 per tonne from the prices in May.
The European LPG was mainly concentrated across the domestic consumers amid rising demand from the industrial applications and household uses along with the electricity generation applications. The market noted a sharp economic rebound after the vaccine roll-out spread optimism which further supported the overall LPG consumption. Supplies were ample as the distribution was balanced from the Middle East after a marked delays in the Asian cargoes. LPG prices in Germany were averaged at USD 210.6 per tonne in the second quarter of 2021, with the overall pricing showing a slight decline during quarter.
For the Quarter Ending March 2021
Due to severe freezing weather in the US Gulf region, LPG supplies were limited in the first half of the quarter. The Gulf freeze catastrophe in the United States heightened the supply related constraints as demand for heating purposes surged and many major production facilities in the region experienced manufacturing disruptions due to the cold weather. The price of Liquefied Petroleum Gas (LPG) in the North American region rose dramatically because of increased demand and sluggish supply, even though the average quarterly price of LPG stood around USD 1665/ton.
LPG supplies in the Asia Pacific region were balanced throughout the first quarter of 2021, owning to the start of a new olefin facilities in China in which 77% of the demand is driven by LPG, followed by the PDH (propane - dehydrogenation) plants in China operating at maximum efficiency. However, temporary operational halts due to the Chinese New Year holidays and production cuts by the OPEC nations showcased some tightness in the supplies. The demand spiked as the winter season hit the northeast Asian region. A leading supplier to the South-eastern region, Saudi Aramco revised its March prices of LPG ratio (50% Propane – 50% Butane) to USD 610/ton and (70% Propane – 30% Butane) to USD 616/ton, registering an increment of +USD 70/MT and +USD 48/MT, from the January settlements.
LPG supplies in the region remained constrained, as imports from the US declined due to inclined domestic demand of the US gulf region. Demand for heating applications rose supported by extreme weather conditions which hit the Northwest European region during the quarter. A major supplier from the Middle East announced a multi-fold increment in the prices of LPG with the offers surging further by increased transportation charges.
For the Quarter Ending September 2020
The Asian LPG demand became resilient in the quarter ending September 2020 as the industrial offtakes improved with plants operating at their full capacities to recover the slumped margins due to pandemic. As majority of Southeast Asian countries cater to their LPG demand through imports, stagnated imports due to Hurricane Laura in the U.S. shrouded the regional buying activities. LPG is anticipated to partially tumble in the coming months with China eyeing to shift the household consumption to piped natural gas. However, several traders are likely to stockpile LPG ahead of the winter season under fears of supply shortage that can interfere with consumer sentiments.
Outlook for LPG considerably improved in August with its increased preference over Naphtha as an industrial feedstock due to the sudden rebound in the Naphtha values. However, with Propane-Naphtha spread decreasing by the end of September, total imports of Northwest Europe showcased a prominent drop by over 10 per cent as compared to August. The fall in offtakes of LPG as a petrochemical feedstock was primarily due to its high prices causing manufacturers switch to other alternative to protect their margins. Furthermore, resurgence in coronavirus in early September has raised serious concerns over the prevailing demand uncertainties in the next quarter.
As many Middle Eastern countries buoyed on increasing the supply of LPG for power generation systems amidst the aggravating heat of August, several companies including ADNOC considerably increased the production output with no substantial increment in the trade flows. The company deviating from its usual service allowed advanced stock purchasing on increased demand from importers. ADNOC agreed to the nominations granting advanced local dates for consecutive two months starting October. Traders perceive this as a smart move that would set the middle east fuel market at optimum and organized inventory levels.