Saudi Aramco Keeps July LPG Price Steady

The Liquefied Petroleum Gas (LPG) market in Saudi Arabia exhibited an unexpected resilience in July 2024, maintaining price stability despite a rise in upstream Crude oil prices that typically would have instigated fluctuations. In July, Saudi Arabia's national oil giant Aramco kept official selling prices (OSPs) for LPG unchanged to deliver the product from the Middle East to Asia-Pacific, while Algeria's Sonatrach hiked OSPs for LPG by 11-18% due to rising demand from the Mediterranean region which serves as benchmarks for Black Sea region, and Turkey. Aramco's July OSP for propane and butane remained constant at USD 580 per metric ton and USD 565 per ton, respectively. While Sonatrach hiked its July OSP for propane by USD 55 per ton to USD 550 and increased it for butane by USD 75 per ton to USD 500.

The escalating crude oil prices, the primary feedstock for LPG production, introduced an upward cost pressure. This increase in production expenses would ordinarily translate into higher LPG prices. Conversely, the challenges faced in the Red Sea, including safety concerns and logistical hurdles, led to a reduction in vessel traffic. This disruption in maritime transportation caused a surge in shipping costs, which typically translates into higher LPG prices for importers. However, in the Saudi Arabian context, the impact of these increased costs appeared to be absorbed without triggering price adjustments due to low demand for LPG consumption. The transition from winter to summer in Asia, a key LPG consumer, typically diminishes demand for heating fuels. This shift would normally exert downward pressure on prices. However, a counterbalancing factor emerged in the form of a decline in US butane exports during June, preventing a surplus from materializing. Simultaneously, the traditional refinery maintenance period during the second quarter, a time when supply constraints often emerge, passed without incident this year. This unusual smoothness in operations contributed to a robust supply environment. Therefore, Aramco's steadfast pricing approach signaled a market characterized by ample supply and subdued demand, despite the countervailing pressures. While the conditions were ripe for price volatility, a combination of steady supply, moderated demand, and strategic pricing decisions conspired to create a surprising equilibrium.

As per ChemAnalyst, the LPG prices in Saudi Arabia might remain low during August 2024 due to the anticipated decline in demand. However, shifts in global economic conditions, geopolitical events, or alterations in production and consumption patterns could disrupt this delicate balance.