LPG Price Increased
02 August 2023
LPG Price Increased
In the context of Saudi Arabia's production reduction and Russia's export reduction, crude oil supply is tightening and continuing, while overseas peak season demand remains strong. The recent low level of finished oil storage has pushed up the cracking price difference, which to some extent supports the strong operation of crude oil prices. Crude oil API inventory exceeded expectations by 15.4 million barrels, exceeding market expectations, and international oil prices continued to rise. The market is stable with some gains, and the current trend of crude oil is strong, with LPG supported and showing a fluctuating upward trend for a consecutive month.
Reason 1:
Strong rise in crude oil cost combined with expected rebound in macro fundamentals
In the context of Saudi Arabia's production reduction and Russia's export reduction, crude oil supply has continued to tighten, while overseas peak season demand remains strong. Crude oil API inventory exceeded expectations by 15.4 million barrels, far exceeding market expectations. At the same time, finished oil also shows full line destocking. Low finished oil inventory has pushed up the cracking price difference, and supply side tightening has to some extent supported the strong operation of crude oil prices. From a macro perspective, market sentiment has also improved recently, with previous pessimistic expectations of the US economic recession weakened. Financial pressure has eased as interest rate hikes come to an end, and domestic policy expectations have boosted market sentiment. In July, the domestic manufacturing PMI was better than expected, and overall market risk appetite has rebounded.
Reason 2:
The FEI price of the external market rose continuously. In August, CP price announced a higher than expected increase, superimposed with flow restriction of Panama Canal
Saudi Aramco's CP was introduced in August 2023, with propane at $470 per ton, an increase of $70 per ton compared to the previous month; Butane is $460 per ton, an increase of $85 per ton compared to the previous month. The landed cost in RMB is about 4573 yuan/ton for propane and 4258 yuan/ton for butane. Since July, FEI prices have continued to rise, with the highest price reaching 604.6 US dollars per ton. The significant increase in FEI and CP has driven the repair and increase of internal prices, forming certain support. At the same time, the Panama Canal Authority announced that from July 30, the daily throughput of new Panama Canal locks will be limited to 10, and the daily throughput of old locks will be limited to 22. The Panama Canal flow restriction event also triggered expected concerns about supply side contraction, boosting PG prices.
The economic and demand prospects are expected by the market, and the support brought by the OPEC+production reduction atmosphere still exists. The domestic Politburo meeting proposed a series of economic policies to stimulate the economy, involving real estate, consumption, policy regulation, and capital markets. The unexpected domestic policies have boosted market sentiment. If international oil prices continue to rise, PG prices may continue to rise. But recently, oil prices have continued to push up to the upper range, with the pressure from overseas economic slowdown. Attention should be paid to the negative feedback of high gasoline prices on the demand side, and the subsequent decline in the price difference of refined oil cracking may drive oil prices to weaken. Oil distribution should focus on the resistance of $87-88 per barrel above, and the results of the OPEC+meeting on August 4th should be followed. At the same time, from the perspective of PG fundamentals, downstream combustion demand is in the off-season, and in terms of chemical demand, the profits of PDH devices have declined, but the operating rate remains stable at over 70%. On the other hand, the operating rates of alkylation and MTBE units are stable. In terms of supply and demand, the export volume of the United States in the Middle East remained at a normal level, and the flow restriction of Panama Canal may have some impact on overseas supply. Recently, crude oil has shown a strong upward trend, with PG10 following suit, with a high valuation and difficulties in receiving downstream goods. It is recommended to closely monitor the impact of changes in crude oil cost on PG. PG2310 is recommended to reduce its position in multiple orders around 5000, and pay attention to opportunities for PDH profit recovery.
In the context of Saudi Arabia's production reduction and Russia's export reduction, crude oil supply is tightening and continuing, while overseas peak season demand remains strong. The recent low level of finished oil storage has pushed up the cracking price difference, which to some extent supports the strong operation of crude oil prices. Crude oil API inventory exceeded expectations by 15.4 million barrels, exceeding market expectations, and international oil prices continued to rise. The market is stable with some gains, and the current trend of crude oil is strong, with LPG supported and showing a fluctuating upward trend for a consecutive month.
Reason 1:
Strong rise in crude oil cost combined with expected rebound in macro fundamentals
In the context of Saudi Arabia's production reduction and Russia's export reduction, crude oil supply has continued to tighten, while overseas peak season demand remains strong. Crude oil API inventory exceeded expectations by 15.4 million barrels, far exceeding market expectations. At the same time, finished oil also shows full line destocking. Low finished oil inventory has pushed up the cracking price difference, and supply side tightening has to some extent supported the strong operation of crude oil prices. From a macro perspective, market sentiment has also improved recently, with previous pessimistic expectations of the US economic recession weakened. Financial pressure has eased as interest rate hikes come to an end, and domestic policy expectations have boosted market sentiment. In July, the domestic manufacturing PMI was better than expected, and overall market risk appetite has rebounded.
Reason 2:
The FEI price of the external market rose continuously. In August, CP price announced a higher than expected increase, superimposed with flow restriction of Panama Canal
Saudi Aramco's CP was introduced in August 2023, with propane at $470 per ton, an increase of $70 per ton compared to the previous month; Butane is $460 per ton, an increase of $85 per ton compared to the previous month. The landed cost in RMB is about 4573 yuan/ton for propane and 4258 yuan/ton for butane. Since July, FEI prices have continued to rise, with the highest price reaching 604.6 US dollars per ton. The significant increase in FEI and CP has driven the repair and increase of internal prices, forming certain support. At the same time, the Panama Canal Authority announced that from July 30, the daily throughput of new Panama Canal locks will be limited to 10, and the daily throughput of old locks will be limited to 22. The Panama Canal flow restriction event also triggered expected concerns about supply side contraction, boosting PG prices.
The economic and demand prospects are expected by the market, and the support brought by the OPEC+production reduction atmosphere still exists. The domestic Politburo meeting proposed a series of economic policies to stimulate the economy, involving real estate, consumption, policy regulation, and capital markets. The unexpected domestic policies have boosted market sentiment. If international oil prices continue to rise, PG prices may continue to rise. But recently, oil prices have continued to push up to the upper range, with the pressure from overseas economic slowdown. Attention should be paid to the negative feedback of high gasoline prices on the demand side, and the subsequent decline in the price difference of refined oil cracking may drive oil prices to weaken. Oil distribution should focus on the resistance of $87-88 per barrel above, and the results of the OPEC+meeting on August 4th should be followed. At the same time, from the perspective of PG fundamentals, downstream combustion demand is in the off-season, and in terms of chemical demand, the profits of PDH devices have declined, but the operating rate remains stable at over 70%. On the other hand, the operating rates of alkylation and MTBE units are stable. In terms of supply and demand, the export volume of the United States in the Middle East remained at a normal level, and the flow restriction of Panama Canal may have some impact on overseas supply. Recently, crude oil has shown a strong upward trend, with PG10 following suit, with a high valuation and difficulties in receiving downstream goods. It is recommended to closely monitor the impact of changes in crude oil cost on PG. PG2310 is recommended to reduce its position in multiple orders around 5000, and pay attention to opportunities for PDH profit recovery.