The US Liquified Petroleum Gas (LPG) market experienced a significant price rebound in January 2025 amid tightened supply and notably boosted demand. This resurgence in prices, after a period of decline, was attributed to the storm of winter weather which increased the logistics and dwindled propane inventories. Moreover, extreme winter weather has increased export demand which surged LPG prices during this timeframe.

Key Takeaways:

• Severe winter storms significantly increased LPG demand for heating and blending. 
• Propane export demand increased in January 2025.
• Rising feedstock crude oil and natural gas prices pushed production costs higher.
• Declining propane/propylene inventory further tightened the LPG supply.

As per ChemAnalyst, the LPG prices are expected to further surge in February 2025 amid Saudi Aramco, a global LPG leader has recently announced the increase of selling prices of propane and butane for February 2025 due to a significant increase in the feedstock Crude oil prices since January 2025.

The most immediate reason for the LPG price surge was the arrival of severe winter storms across the USA.  These storms brought frigid temperatures well below normal averages, severely increasing the demand for heating fuels.

Propane, a primary heating fuel in many regions, saw a corresponding spike in consumption.  While the increased demand for heating is an obvious consequence of colder weather, the impact of these frigid temperatures extends far beyond simply burning more fuel.  The extreme cold has a cascading effect throughout the entire energy supply chain.  

Coupled with the domestic demand surge, the US LPG market also experienced a significant increase in export demand.  This demand was driven by several factors, including the global need for heating fuels during winter and the attractiveness of US LPG prices compared to other international markets.  The high export values demonstrated the strong global demand for both propane and butane. 

The already tight supply situation was exacerbated by low propane inventory levels.  As demand outstripped production and imports, inventories were drawn down rapidly.  The Energy Information Administration (EIA) data provided a stark illustration of this drawdown. 

During the last week of December 2024, US propane inventories stood at 85.043 million barrels. By the week ending January 24, 2025, those inventories had plummeted to 66.249 million barrels, a decrease of 18.794 million barrels in just four weeks.  This rapid depletion of inventories signaled a tightening supply situation and further fueled price increases. 

Adding to the supply-demand imbalance, production costs also rose in January 2025.  Feedstock crude oil prices surged by 7.2% due to threatened US tariff impositions.  This increase in crude oil prices directly impacts the cost of producing LPG, as crude oil is a key feedstock for LPG production.