Demand is set to strengthen ahead of the festive season, but surging premiums could prove a challenge for importers, writes Rituparna Ghosh
India's LPG demand is peaking during the country's festive season in the final quarter at the same time as Middle Eastern supplies further tighten and import prices surge, raising concerns that spot requirements may fail to be met.
India's LPG consumption rose to about 2.6mn t last month, up from 2.5mn t in September and 2.1mn t in May — the lowest since the Iran war started, government data show. Demand averaged nearly 3mn t/month in the three months prior to the war. Seaborne imports recovered to about 1.52mn t from 1.46mn t over the same period and a low of 971,000t in April, data from ship tracker Kpler show.
The country's demand is expected to strengthen further this month and in December as distributors build inventories ahead of Diwali and other festivals. But Indian buyers are facing a markedly tighter import market. State-run refiner Bharat Petroleum (BPCL) closed a buy tender on 29 October for six evenly split propane-butane cargoes for November-December delivery. The results of the tender are unknown as of 3 November.
Spot cargo premiums to Mideast Gulf fob benchmarks surged late last month. Deliveries to Indonesia, Vietnam and south China in October-December traded at $350-450/t premiums to state-controlled Saudi Aramco's contract prices (CPs). Such premiums could prove challenging for Indian importers who have absorbed high import costs until now under the expectation that prices would eventually soften when Mideast Gulf supplies recovered.
Aramco's lower-than-expected November CPs of $720/t for propane and $780/t for butane, plus premiums of $350-450/t, still equate to $1,070-1,230/t, which gives a 14kg cylinder price of 1,600-1,800 rupees ($17-19) after adding bottling and distribution costs. This compares with the capped rate of Rs942 in Delhi, stable since June, while 19kg commercial cylinders cost Rs2,820, up from Rs2,810 a month earlier and Rs1,740.50 in February, as they move more closely with import costs.
Indian importers have already been buyingLPG cargoes at premiums of $300-500/t to the CP in September and October, market participants say. This may limit their ability to pursue additional spot purchases, particularly at a time when authorities are reluctant to allow household fuel prices to rise.
Spot of bother
Competition for cargoes is also intensifying as demand from China and other southeast Asian countries remains high and Mideast Gulf supply severely curtailed. This could see Indian buyers facing reduced spot availability and higher premiums. US propane and butane prices have also surged following force majeure declarations at two US Gulf coast export terminals, raising concerns over prompt supplies.
No recent Indian purchases of US cargoes have occurred, according to market participants, suggesting the country is largely relying on Middle Eastern supply. Indian importers' tender for 2.75mn t of US LPG for delivery in 2027 is nearing completion, they say, which is up from the first such term deal for 2.2mn t in 2026. The deal underscores Delhi's longer-term efforts to diversify supplies and reduce dependence on Middle East producers, but will do little to plug the short-term shortfall or the need for imports of 20mn t/yr.
Higher domestic refinery runs and recent capacity additions have boosted India's LPG output, but consumption continues to outpace supply. Domestic production averaged 41,000 t/d in September, up from 31,700 t/d a year earlier, but slipped from the June peak of 49,800 t/d, leaving India increasingly reliant on imports again. India is likely to remain a key source of incremental import demand for the remainder of this quarter as a result, unless elevated premiums on strong competition from China and the rest of Asia force refiners to raise cylinder costs.
