Press

Petchem LPG Demand Bounces Back


Global petchem use of LPG will expand by 140,000 b/d this year, according to ESAI Energy's newly published Global NGL Outlook. Last year, scarcity and high prices caused petchem demand to contract by 50,000 b/d and encouraged steam crackers to up their naphtha intake. This year, ESAI energy has been forecasting an increase in LPG supply that will soften LPG prices relative to naphtha and encourage steam crackers to turn back to LPG. The latest data bear out this prediction. Consequently, robust petchem demand will help steer the market toward balance, averting a more bearish tilt into surplus.

The report details that this turnaround in petchem LPG demand is already underway. About 30 percent of global LPG use is used for petrochemical purposes, where demand is volatile due to feedstock-switching. North Asia, comprised of Japan, South Korea and Taiwan, is the growth market for the petchem sector. In the last quarter of 2017, petchem demand in Taiwan and South Korea plunged, dragging down overall North Asian petchem demand to just 170,000 b/d, 70,000 b/d less compared to a year earlier. However, monthly data provide evidence that petchem demand already recovered. Given ESAI Energy's outlook for favorable LPG pricing, North Asia will drive a 140,000 b/d increase in global petchem demand for LPG this year, which will contribute to overall LPG consumption growth of 340,000 b/d.

“Due to existing and anticipated supply growth in 2018, the LPG market has quickly transitioned from scarcity to abundance,” explains Andrew Reed, ESAI Energy's Head of NGLs. “Our analysis shows that there is plenty of discretionary petchem demand out there to balance the market. Therefore, we expect to see a balanced market rather than a glut.”



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