ESAI Outlook: LPG market’s bullish fundamentals to fade fast
Global LPG fundamentals in the second half of 2017 are shaping up to be much less bullish than in the first half of the year, according to ESAI Energy’s newly published Global LPG Outlook.
The report details how decelerating demand growth and the renewed expansion of supply from North America fractionation will cause bullish fundamentals to fade fast in the second half of 2017. This reverses the scarcity of the first half of the year, in which Middle East LPG exports collapsed following OPEC production cuts.
Led by demand trends in China and other Asian markets, annual demand growth will slow to 250,000 bpd this year, 110,000 bpd less than in 2016. Meanwhile, the renewal of NGL supply growth in North America is well underway. As the year progresses, gains in supply will catch up with demand growth and bring the market back into balance.
“Global inventory data reveal the two turning points in the market,” said ESAI Energy Principal Andrew Reed. “Our comparison of the year-on-year change in stocks, an indicator of whether the market has been in surplus or deficit for the previous 12 months, shows that the balance tipped into deficit in early 2017. But based on our projections for supply and demand for the balance of the year, we expect the market to quickly move back into surplus.
“The impressive builds in US propane stocks in the past six weeks are evidence that supply growth is gaining on demand. The build in US propane stocks over the next several months will exceed the expectations of many.”
The ongoing development of shale gas resources in the US has spurred infrastructure construction for both natural gas processing capacity and LNG export terminals.
Russian natural gas monopoly Gazprom is strengthening its presence in the gas market of the Middle East through the planned construction of an 11-metric-MMtpy–12-metric-MMtpy LNG plant in Iran.
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