LPG Price Trends & Market View – September

Asia & Middle East

Global propane prices

• Delivered Japan propane prices averaged 6.5pc lower in July compared a month ago owing to higher supply and weaker demand.
• A prompt supply overhang in August shipments into Asia-Pacific drove cash differentials to $28/t discount against the August Argus Far East Index (AFEI), from a $5.5/t premium when spot trading for that period commenced.
• Strong exports from the US and the Mideast gulf coincided with summer demand lull in northeast Asia, while China’s import demand was muted by uncertainty in tariff policies.

LPG Versus Naphtha

• Weakness in the LPG complex owing to bearish supply fundamentals widened the discount of propane and butane against naphtha.
• Deepening discount boosted feedstock switching at northeast Asian ethylene crackers.
• The front-month propane swaps averaged $51/t discount to its naphtha counterpart in July, from $33/t last month, which resulted in increased spot LPG purchases from mainly south Korea.
• Limited supply of butane in the August and September delivered market owing to a shuttered butane arbitrage from the US drove butane values to a $30/t premium to propane. 

Saudi Aramco posted Propane & Butane CP

• Saudi Arabia’s state-controlled Saudi Aramco lowered the August Contract Prices (CP) for propane and butane by $55/t on the month to $520/t and $490/t respectively.
• Poor Asian demand and abundant evenly split ratio cargoes pushed spot differentials on August-loading cargoes from the Mideast gulf to $50/t discount to August CP. Buyers demanded bigger discounts in the wake of rising freight costs.

Chinese PDH performance

• Run rates at Chinese PDH plants remained steady at 72pc at the end of July.
• Production margins turned positive, supported by a decline in propane feedstock costs and strong Chinese polypropylene futures, which enabled manufacturers to lock in profits.

Europe

Propane sellers struggled to find homes for their product in July owing to depressed petrochemical demand. This has driven northwest European large cargo propane discount to underlying front-months swaps — a key indicator of spot market weakness— to the lowest level since mid-February.

The discount widened to $15/t on 21 July from mere $2.50/t at the month’s start as persistent public selling pressure for large cargoes — international seaborne product delivered to the hub in 20,500t or 22,400t parcels — met scant buying interest, exposing a substantial gap in demand across the early August dates.

US LPG exports to the region firmed by 5pc month-on-month to 623,000t, according to Kpler ship-tracking data, as softening sentiment in Asia-Pacific freed up more cargoes for northwest Europe. Month one east-west spreads — the differential between Argus Far East Index (AFEI) and cif ARA swaps assessments — shrunk by $12.50/t to $66.75/t across July. Simultaneously, local supply from the North Sea held steady at 259,000t compared 260,000t a month prior.

Increasing transatlantic length met weak demand from the regional petrochemical sector, which was pressured by the mothballing of one of the three trains at US firm Dow's cracker complex in Terneuzen, the Netherlands, at the month's start. The move cuts the plant's total ethylene capacity by 600,000 t/yr to 1.2mn t/yr.

But physical steep discounts and widening Northwest European propane's contango forward structure – prompt prices at a discount to those further forward — soon began to encourage storage buying. The August-September paper spread widened to -$7.25/t at the end of July from -$5.25/t at the month’s start.

Americas

US production of natural gas liquids (NGLs) rose to an all-time high of 7.47mn b/d in May, the latest data available from the EIA, according to the US Energy Information Administration, as gains in gas processing continue to outpace US consumption and exports of ethane and LPG.

Ethane production rose to an all-time high of 3.1mn b/d, while consumption held steady at 2.4mn b/d and exports stood at 534,000 b/d, leaving a net overhang of 166,000 b/d per month. US ethane inventories rose to 77.4mn bl, up 7.4pc versus last year, and the highest levels seen since August of 2024. US ethane stocks are poised to reach new highs when June data is released, as the US Commerce Department’s brief licensing requirement on ethane exports to China, which was quickly rescinded, led to lower exports that month.

Propane production rose to an all-time high of 2.275mn b/d, and May inventories stood at 62.6mn bl, down 6.2pc versus the prior year’s levels. US propane inventories remain 9pc above the five-year average at the end of July, rising by a smaller than expected 1.15mn bl to 83.5mn bl the week ended 25 July, according to the EIA.

US butane production from natural gasoline processing hit an all-time high of 711,000 b/d in May, up 9pc versus last year. The gains pushed US butane stocks to 45.5mn bl, the highest inventory figure for that month since 2019, as motor gasoline consumption, which accounts for a significant portion of domestic butane demand, stood at 9.05mn b/d in May, down 3.6pc versus last year and the lowest demand for the month since 2020.

Outlook: The quarter ahead

• Prices jumped around $50/t during the Israel-Iran conflict, but once the ceasefire was signed this premium vanished almost immediately
• US tariffs remain a key uncertainty, but there is enough spare length in the short term that we do not expect it to have a large impact on prices
• The imminent start of the Nederland terminal and swelling US stock levels will keep supplies readily available

The next 6 months and longer term

• Even if an agreement is reached to remove barriers on LPG trade between the US and China, we expect the disruption to remain for several months as uncertainty persists
• Middle East supply will begin to ramp up, pressuring prices as we approach 2026
• Large amounts of naphtha cracking capacity is coming in China later this year, which could pressure LPG consumption in other NEA crackers