The market value of liquefied petroleum gas is growing rapidly

The market value of liquefied petroleum gas, which can be used as a car fuel and is an alternative to gasoline, is growing rapidly. The main reason is the expectation of an increase in the cost of gasoline due to drone attacks on oil refineries, as well as the beginning of the high season for LPG consumption. However, so far experts do not see a real shortage of petroleum products, and the government promises to take additional measures to saturate the market.

Exchange quotations of liquefied petroleum gases (LPG), which in mid-March reached their lowest level since the beginning of 2024, began to actively recover. By March 20, the price for this type of petroleum product in the European part of Russia reached 20.3 thousand rubles. per ton, which is 16.6% higher than the level of March 15, follows from data from the St. Petersburg International Exchange. This is still 22.5% lower than the peak January values, when the cost of LPG exceeded 26 thousand rubles. per ton.

“Commodity Market Analytics” associates the rise in prices of liquefied gases with a reduction in sales by the largest producers.

At the time of the main increase in quotations – March 19 – deliveries to the stock exchange fell by almost a third, to 10.3 thousand tons. Gazprom, Surgutneftegaz and SIBUR reduced their offers. The petrochemical company, which usually sells all lots of propane-butane from the Tobolsk plant at the start of trading, on Tuesday began offering gas in the last five minutes of the session. “The lack of volumes of one of the largest producers intensified demand, and subsequently all of the company’s transactions on the Tobolsk basis were completed in one second at the highest possible price,” notes the review of Commodity Market Analytics. Experts believe that the reduction in LPG supplies to the stock exchange adds nervousness to consumers against the backdrop of the situation on the market for light petroleum products, the supply of which has decreased due to accidents at refineries.

“LPG is a substitute for gasoline, so they rise in price following the sharp rise in fuel prices,” adds Maxim Dyachenko, managing partner of Petroleum Trading. He also recalls that liquefied gases have a pronounced seasonality of consumption and in February quotations traditionally reach their lowest point, from which an increase follows against the backdrop of rising consumption.

According to Mr. Dyachenko, there is currently no shortage of petroleum products in Russia, but the market is “trading in expectations,” and amid attacks on refineries, participants fear supply problems.

Quotations for gasoline and diesel fuel have been actively growing since March 11, despite the ban on the export of gasoline introduced on March 1 and the remaining restrictions on the export of diesel fuel abroad. Thus, on March 19, the price of AI-95 gasoline on the stock exchange rose by 1.29% and for the first time since the end of September 2023 exceeded 65 thousand rubles. per ton. Gasoline AI-92 rose in price by 1.25%, to 52.5 thousand rubles. per ton. Summer diesel fuel increased in price by 0.4%, to 66.3 thousand rubles. per ton, off-season diesel – by 1.86%, to 67.4 thousand rubles. per ton.

According to Victor Katona from Kpler, cumulatively, due to accidents, Russian refineries could reduce oil refining in the country to approximately 5.1–5.2 million barrels per day, provided that the available and previously idle primary refining capacity is refilled. In March, the Ryazan and Syzran oil refineries of Rosneft and the Nizhny Novgorod oil refinery of LUKOIL suffered from drone attacks.

At the same time, the Ministry of Energy does not expect that the attacks will lead to a reduction in primary oil refining in the country at the end of the year. As the head of the ministry Nikolai Shulginov told reporters, in 2024 processing volumes will remain at the level of last year (275 million tons). According to him, the situation with the supply of fuel against the backdrop of incidents at refineries is under control and the government is discussing with oil companies adjusting schedules for planned refinery repairs. Among the measures to maintain a surplus of gasoline on the domestic market, the official named increasing production and removing logistics restrictions on transporting fuel by rail. At the same time, the minister noted that new legislative initiatives to stimulate oil refining are not currently being discussed.

Olga Mordyushenko, Dmitry Kozlov