Opinion

LPG Market to Rebalance


The end is in sight for the run on global LPG stocks, according to ESAI Energy's recently published Global LPG One-Year Outlook. In 2018, the geographically widespread growth of LPG production from fractionation will gradually begin to pull the market out of deficit. Year-on-year declines in global LPG stocks have continued into the fourth quarter of this year, driving up propane and butane's prices relative to naphtha. These price shifts have priced some petrochemical demand for LPG, including propane use for PDH units, out of the market.

The Global LPG One-Year Outlook describes how growth of LPG supply from fractionation will accelerate, bringing supply and demand back into alignment. Iran's South Pars, Qatar's Barzan, and Australia's LNG projects will contribute to growth next year. In 2017, global supply from fractionation increased by only 60,000 b/d. Supported by widespread growth outside North America, supply from fractionation will grow 300,000 b/d next year. As supply growth accelerates, bullish propane and butane prices will tame petrochemical demand. According to ESAI Energy's global LPG balance, the year-on-year declines in global LPG inventories will slow or come to a halt by the end of 2018.

“Outside North America, there have been no bright spots for LPG supply growth in 2017. Even South Pars, the one place outside North America where we anticipated new supply, failed to deliver,” explains Andrew Reed at ESAI Energy. “At the end of 2017 and in early 2018, new supply from South Pars and other projects will begin to have an impact. Between continued growth in North America and renewed growth elsewhere, the market will gradually rebalance.”



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