For nearly a year, robust LPG supply has sustained unusually wide LPG discounts to naphtha, fueling a surge in global petchem LPG demand. ESAI Energy believes that sustaining this favorable pricing through the upcoming winter heating season will require more U.S. exports than is feasible. The completion of Mariner East 2 will enable the U.S. to increase exports compared to recent levels, but not enough to match seasonally higher demand from other sectors such as heating and energy. On top of U.S. export constraints, unimpressive stock builds in U.S. and other key OECD countries reinforce our expectations that LPG pricing will turn bullish in less than two months.
More generally, the ability of petchems to absorb greater amounts of excess LPG has implications for the future of storage and seasonality of trade flows, tanker demand and prices.