LPG stock quotes fell by 15% after rising at the beginning of the year

Exchange quotations of liquefied petroleum gases, after a slight increase in the first week of trading, this week showed a decline, which reached 15% in Siberia and the Urals. Experts believe that LPG rose in price along with gasoline due to the accident at the LUKOIL refinery, and the current rollback is associated with seasonal factors. In their opinion, the accident at the SIBUR plant in Perm hardly affected prices, since it consumed relatively small volumes of LPG. The market expects price volatility to continue in the near future.

The cost of liquefied petroleum gas (LPG) according to the national index (taking into account the prices of all factories in the Russian Federation) at St. Petersburg International Trading Exchange on November 18 decreased by 5.4%, to 19.5 thousand rubles. per ton. Since the beginning of the week, quotes have fallen by 12.5%. Even more significant negative dynamics were demonstrated by trading in the Siberia and Urals index. There the price collapsed by 8.3%, to 18.5 thousand per ton, and since the beginning of the week – by 15.4%. At the same time, in the European part of Russia, the cost of LPG increased by almost 1%, to 24.1 thousand rubles.

Market participants explain the current trend by seasonal factors and traditionally low demand for autogas in January. They remind you that in the first working week of the year, LPG quotes actively grew following gasoline, which, in turn, rose in price on the news about the accident at the Nizhny Novgorod LUKOIL refinery. “At this moment, traders tried to raise the price, but now the fundamental market conditions are working again, so there is a rollback,” says one of Kommersant’s interlocutors.

At the same time, despite the significant increase in prices specifically in the Urals and Siberia, the market does not attribute this to the shutdown of SIBUR’s pyrolysis capacities in Perm. There, on January 17, at the Sibur-Khimprom plant (capacity – 700 thousand tons), a fire occurred at an ethylene and propylene production unit. The company is currently assessing the consequences of the fire. This pyrolysis plant uses LPG as a raw material, but Kommersant’s interlocutors believe that the volume of consumption was small enough to significantly affect the market. In 2022, Sibur-Khimprom processed about 220 thousand tons of LPG. But in 2023, according to Reuters, refining volumes fell to 150 thousand tons, which is about 1.2% of LPG production in Russia.

As Maxim Dyachenko, managing partner of Petroleum Trading (the largest independent broker for the sale of LPG), notes, in December and January, manufacturers increased the production and shipment of LPG to the domestic market, and now there is nowhere to accept the goods. Against the backdrop of low sales, the market becomes overstocked and prices fall sharply. Maxim Dyachenko explains that the market for liquefied gases is much more volatile than the market for petroleum products: automobile gas has a higher level of fire and explosion hazard, and a storage facility for it (GNS) is more difficult and expensive to build and approve. “The number of gas pumping stations is many times smaller than oil depots, so the storage volumes are relatively small. Seasonal factors also influence LPG consumption,” says the expert. Maxim Dyachenko notes that for wholesale prices for LPG, fluctuations during the year are twice as normal, and in 2023 volatility has increased in all products and especially in LPG. Taking this into account, he notes, the current change, although a noticeable increase, is within normal volatility. According to him, the market also depends on the export alternative and is very sensitive to changes in quotations. In the future, as demand for motor fuel grows, the head of Petroleum Trading predicts a recovery in the cost of liquefied gases.

At the same time, in the second half of the year, the price of LPG may begin to be put under pressure by the upcoming EU export embargo, which is due to come into force in December. Europe is the largest export destination for Russian LPG (about 3.5 million tons per year), and redirecting this volume to other markets will be difficult and take time.

Olga Mordyushenko