August 2024 LPG Prices Soar in Italy Amidst Supply Crunches

The Italian LPG (Liquefied Petroleum Gas) market experienced a sharp upturn in early August, after witnessing a prolonged downtrend precipitated by low crude oil feedstock values. While a supply-side constraint ignited the price surge, major players including Saudi Aramco announced a price revision in August 2024 which influenced the LPG market in Italy as well. Factors such as production setbacks, hurricane disruptions, declining US exports, and increased freight costs coalesced to create a market characterized by scarcity. As a result, LPG prices surged during early August as buyers competed for limited available supply.

A critical contributor to the price escalation was the disruption of LPG supply from the United States, a key exporter to Europe. Production setbacks within the Gulf Coast, a pivotal manufacturing hub, were exacerbated by the impact of Hurricane Beryl. The storm's disruption of transportation infrastructure inflated freight costs, further compounding the supply-side challenges. Simultaneously, a decline in propane exports from the US amplified the supply tightness. With inventories dwindling, market participants grew increasingly anxious about potential shortages. The pull of more competitive prices in other regions redirected US LPG cargoes eastward, leaving European buyers with limited options. This geographical shift in supply exacerbated the scarcity in the European market. Major suppliers, including industry behemoth Aramco, capitalized on the tightening market conditions by increasing their official selling prices. This strategic move reflected the growing bullish sentiment prevailing in the global LPG market which resulted in a price surge to settle at USD 760/MT Propane CFR Genoa (Italy) and USD 1029 Butane CFR Genoa (Italy) on 9th August 2024.

While overall domestic demand remained relatively subdued during the summer months, industrial consumption registered an uptick. This increased demand further strained the already tight supply, propelling prices upward. The resulting imbalance between supply and demand created a seller's market, where LPG suppliers held significant pricing power. Despite a relatively healthier European propane market, the transatlantic propane arbitrage remained closed. This meant that importing LPG into Europe was an economically unattractive proposition, leading to higher netbacks for traders and, consequently, elevated prices for consumers. The combination of dwindling supply, increased demand, and transportation disruptions created a surge in LPG prices.

As per ChemAnalyst, the LPG prices in Italy may surge in September 2024 amid an increase in production costs due to a rise in feedstock Crude oil prices. Also, the demand from the propane dehydrogenation units may increase which could surge the LPG queries during this timeframe.