October 2024 witnessed a significant surge in LPG prices in Saudi Arabia including increased demand for heating and blending fuels, supply constraints stemming from logistical challenges and geopolitical tensions, and rising feedstock crude oil prices which collectively contributed to a significant upward pressure on LPG prices, impacting both domestic and international markets.

Saudi Aramco, the state oil producer, responded to these market dynamics by raising its official selling prices (OSPs) for LPG for October 2024 to settle the prices at USD 625/MT Propane Ex-Work Dhahran and USD 620/MT Butane Ex-Work Dhahran which was primarily driven by the continuous increase in feedstock crude oil prices. Moreover, the escalating demand for LPG from the downstream heating and blending fuels influenced Saudi Aramco to raise their OSPs during this timeframe. As colder temperatures set in, the need for heating fuels, such as propane, has risen substantially. This surge in demand has directly translated into a steady appreciation of inland propane market prices. Concurrently, the blending fuel market has also witnessed a significant uptick. Participants in the market have been actively restocking their inventories in anticipation of further price increases, leading to a tightening of spot volumes and consequently, pushing prices upwards. The strengthening of the propane market relative to naphtha, fueled by robust downstream demand and market competitiveness, has further exacerbated this upward pressure on LPG prices.

Supply-side constraints have also played a pivotal role in driving up LPG prices. Logistical challenges, including persistent attacks in the Red Sea, have curtailed LPG shipments, leading to increased freight charges. These disruptions have exacerbated the existing supply-demand imbalance, contributing to the price surge. Moreover, the geopolitical landscape has added additional pressure on markets. The attack on Israel by Iran sent crude oil prices soaring, which, in turn, impacted the production costs of LPG. The 9.3% hike in the feedstock Crude oil prices since September 2024, caused the manufacturers to revise their offers positively. Henceforth, as a benchmark for LPG contracts in the Asia-Pacific and MEA region, rising crude oil prices have directly influenced the pricing dynamics during this timeframe.

As per ChemAnalyst, the LPG prices in November are expected to continue their bullishness due to foreseen surge in the demand from the downstream heating and blending fuels as winters are drawing closer. Concurrently, demand from the downstream propane dehydrogenation units may increase which could surge the LPG consumption. Moreover, levels in the storage units might lead to a bullish market scenario for LPG in the upcoming months.