Global LPG Seaborne Supply Declines in Q3 2023

According to Dorian LPG, the global liquefied petroleum gas (LPG) seaborne supply is estimated to have fallen by 1.5 million metric tons in the third quarter of 2023. This drop follows a surge in supply during the second quarter.

Rising Natural Gas Liquids Production in the US

Dorian LPG reports that natural gas liquids production in the US continued to rise in the third quarter of 2023. Both propane and butane inventory levels also grew during this period.

Increase in US LPG Exports

US LPG exports increased to about 14.7 million metric tons in the third quarter of 2023, slightly up from 14.6 million metric tons in the second quarter, as stated by Dorian.

Growth in LPG Exports for January-September 2023

Furthermore, LPG exports for the January-September period of 2023 reached 43.5 million metric tons, compared to 38.6 million metric tons during the same period in 2022.

Saudi Arabia’s Crude Oil Production Cuts Impact LPG Supply

Dorian notes that Saudi Arabia deepened its crude oil production cuts in the third quarter of 2023, reducing its output to around nine million barrels per day (mmb/d). This decrease resulted in a reduction in LPG supply and exports from Saudi Arabia to 1.7 million metric tons in Q3, down from 2.6 million metric tons in Q2.

Overall Assessment of Global LPG Seaborne Supply

In summary, global LPG seaborne supply is estimated to have declined by approximately 1.5 million metric tons in Q3 2023 compared to Q2 2023. This decline can be attributed to the rise in supply seen during Q2. However, global exports have increased by 14% to 98.5 million metric tons for the January-September period of 2023, compared to 86.6 million metric tons in 2022.

LPG’s Advantage over Naphtha in NW Europe

LPG continues to maintain a strong advantage over naphtha in Northwest Europe, with the propane-naphtha spread remaining over minus $100 per metric ton.

Global Petrochemical Demand Remains Subdued

Despite LPG’s advantage over naphtha, global petrochemical demand remains subdued. Margins for propane and butane in both the East and West have been averaging negative values.

Continued Consumption of LPG in Steam Crackers

Nevertheless, due to LPG’s favorable position compared to naphtha, it continues to be consumed in steam crackers despite the negative margins. However, PDH (Propane Dehydrogenation) margins have worsened throughout the quarter, falling from an average variable margin of $141 per metric ton in Q2 2023 to -$47 per metric ton in Q3 2023. Consequently, several PDH plants have lowered their operating rates, leading to a decrease in Chinese imports of LPG in Q3 2023 compared to the previous quarter.

Propane and Butane Prices on the Rise

Dorian cites an increase in propane and butane prices in Northwest Europe and Northeast Asia compared to the second quarter of the year.

Higher Brent Prices Drive Increased Commodity Prices

Eastern Propane Prices Soar

Impact on the LPG Trade

Tight Supply and Strong Demand

Shifting Routes and Delivery Schedule

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