The international market for liquified petroleum gas (LPG) dived on Jan 16-17 due to easing trade friction between the US and China as well as expectations that LPG supply from Saudi Arabia would recover. The Aramco Contract Price (CP) for February loading which Asian importers use as a basis for international trade had been forecast to be at about $525/mt for propane as of Jan 15 but the forecast was drastically revised down to about $470/mt on Jan 17.

As China signed officially the first stage of a trade agreement with the US on Jan 15 and announced that it would increase energy purchases more than the level as of 2017, views heightened that demand for LPG of Middle East origin from China which had supported the Aramco CP so far might recede. A Chinese importer says, "The agreement by the US and China obviously weighed on the market on Jan 15". In addition, Saudi Aramco which sets the Aramco CP every month released to its customers in the early morning on Jan 17 Tokyo time that it imposed no quantity restrictions on February liftings of LPG. The producer reduced supply volume of LPG for January exports owing to cuts in crude oil output but the situation appeared to be improving. A Japanese importer pointed out that if LPG supply from Saudi Arabia returned to normal, the market would be weighed down.

Nevertheless, while bearish factors emerged from both the supply and demand sides, market sources are concerned about less spot availability for propane cargoes from the US that are scheduled to arrive in the Far East in February as loading operations halted in the US Gulf Coast due to foggy weather. Further, spot demand for propane and butane from India and Indonesia, major consumers of LPG, is firm. A Japanese importer is paying attention to whether these potential bullish factors will be taken into account when the Aramco CP for February is set. The Aramco CP for February loading will be released to term customers on Jan 30.