LPG Demand Declined Causing Low Prices in Asia During December 2023

The prices of LPG fell notably throughout December 2023 as a result of low demand from the downstream industries in Asia, especially China. The market experienced a notable drop in costs of liquified petroleum gas, or LPG, amid low prices of crude oil, a feedstock used for LPG production. An analysis by Procurement Resource reported a m-o-m reduction of approximately 4.65% in China between November and December 2023.

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Cold Wave Disrupted the Supply, Narrowing the Prices of LPG in November

Bad weather conditions in some of the major Asian regions affected the transportation of LPG across the globe. As a result, production units slightly lowered the prices, impacting the overall cost of LPG in the Asian market. Chinese provinces, especially the Shandong market, witnessed a slight decline in LPG prices, as well, at the end of November 2023.

LPG Prices Dropped Amid Loss Faced by the Downstream Industries in December

The situation of low supply coupled with a decline on the demand side, especially from the polypropene dehydrogenation unit or the PDH unit that uses LPG for propane production on a large scale. The losses faced by the downstream industries prompted to propose a price reduction in the LPG market. The reduction in demand dampened the already low costs of LPG, building negative market sentiment.

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Low costs of Crude Oil due to a Rise in Inflation Reduced LPG Prices in December

The month of December witnessed a rapid fall in the prices of LPG as the costs of crude oil declined amid a rise in inflation. The hike observed in the interest rate imposed by the Federal Reserve in the USA had a negative impact on the costs of crude oil, which is largely used for LPG production. The decrease in the costs of feedstock contributed to the downturn in LPG prices, as well.

According to Procurement Resource, the prices of LPG fell drastically during the month of December as a result of several market factors affecting the dynamics of demand-supply. The low demand acquired from the downstream industries, along with the low costs of crude oil, impacted the overall cost of LPG in the market during the period. It concluded a m-o-m decline of approximately 4.65% during December 2023. The analysis suggests a similar sluggish trend to continue in the LPG market in the forthcoming months as well.