Saudi LPG Vanishes: 450,000 Monthly Tons Lost Through May

Asian LPG importers face an immediate $20-30 per ton margin hit as Saudi Aramco extends its suspension of LPG exports from Juaymah terminal through May 2026, removing 450,000 tons monthly from global supply chains. This represents approximately 3.5% of global seaborne LPG shipments — but the concentration of flows makes the impact far more severe. At least 60% of LPG exports from Juaymah were bound for India last year, while China received around 15% of the exports. For Indian buyers, this is not a market disruption — it is a supply elimination. Liquefied petroleum gas (LPG) — a mixture of propane and butane used for cooking, heating, and petrochemical feedstocks — has no meaningful substitute at scale for household cooking applications.

‍

The disruption began on February 23 when structural damage occurred to part of the delivery system carrying propane and butane at the Juaymah NGL facility. Repair work was further prolonged after a fire broke out at Juaymah earlier this month due to an Iranian attack. The Juaymah terminal — located near Saudi Aramco's Jafurah gas field and Ras Tanura refinery on the kingdom's east coast — ranks among the world's largest LPG export hubs. The terminal is one of the world's largest exporters of natural gas liquids (NGL), which include propane and butane. When a facility this scale goes offline, replacement volumes are not readily available from alternative suppliers.

‍

Consider a mid-sized Indian LPG importer that typically sources a 44,000-ton cargo monthly from Juaymah at contracted prices. Each cargo typically ranges from 44,000 tonnes to 46,000 tonnes in size. Before the suspension, the delivered cost was approximately $580-600 per ton. Up to 10 cargoes loading in March to India have been cut, a refining source with knowledge of the matter said, adding that some of these were purchased directly from Aramco. That importer must now source replacement volumes in the spot market, where propane futures for March on the Far East index surged nearly 5% after the Asian market closed above $590 per tonne, hitting its highest level since early April 2025. The $20-30 premium per ton directly reduces operating margins, with no ability to hedge against further price escalation.

‍

On the buy side: Large integrated Indian refiners like Bharat Petroleum and Hindustan Petroleum face immediate cash flow pressure from forced spot procurement. In January 2026, India produced 1.158 million tonnes of LPG, while imports stood at 2.192 million tonnes in the same month, underscoring the country's heavy reliance on imported cooking gas. Around 62–65% of total demand is met through imports. These companies cannot reduce demand — cooking gas consumption is completely inelastic — so they must absorb higher procurement costs. For a typical state-run oil marketing company importing 200,000 tons monthly, the additional $4-6 million in costs per month accumulates directly against retail margins.

‍

On the sell side: Alternative Gulf LPG suppliers — including Qatar's Ras Laffan and UAE's Ruwais terminals — capture immediate margin expansion from supply tightness. Although other Saudi LPG export hubs, including Ras Tanura and King Fahd Industrial Port in Yanbu, remain operational, the Juaymah disruption has already tightened the global LPG market at a time when petrochemical demand in Asia remains firm. These suppliers can command premiums of $10-15 per ton above normal contract terms when desperate buyers bid for replacement volumes. Qatar's QatarEnergy and ADNOC can redirect cargoes originally destined for other markets to capture Asian premium pricing.

‍

For large integrated players with derivatives access — companies like Reliance Industries, China's Sinopec, or Japan's JERA — the hedging response involves immediate purchasing of propane and butane futures to lock replacement costs. The CME Group's LPG futures provide some price protection, though basis risk remains substantial for Asian delivery points. LNG JKM rose to 16.56 USD/MMBTU on April 27, 2026, up 0.03% from the previous day. Over the past month, LNG JKM's price has fallen 19.36%, but it is still 46.76% higher than a year ago. The correlation between LNG and LPG pricing means energy-intensive buyers face compound pressure across multiple fuel streams.

‍

For smaller regional operators — mid-sized fuel distributors, independent cooking gas suppliers, regional cooperatives — without derivatives access, the practical equivalent involves immediate bilateral contract diversification. Buyers may look to the US for supply, which could push up prices more as there is already a backlog in US exports in recent weeks, three regional trade sources said. These operators must secure alternative supply agreements with US Gulf Coast exporters, typically at 30-45 day payment terms rather than the 15-day terms common with Saudi suppliers. The additional working capital requirement strains cash flow for smaller operators.

‍

The freight dimension concentrates additional margin pressure on vessel operators and charterers. LPG carriers — specialized vessels equipped with pressurized tanks and refrigeration systems for transporting liquid petroleum gas — face route optimization challenges as traditional Saudi-to-India flows disappear. A typical 84,000-cubic-meter very large gas carrier (VLGC) earns approximately $35-50 per day at current charter rates. The disruption forces longer voyages from alternative loading points, with US Gulf Coast to Asia routes adding 10-15 days compared to Middle East origins. Charter rates increase while cargo owners absorb the additional freight costs, further eroding import margins.

‍

The financing structure reveals where margin concentration shifts during supply disruptions. Traditional Saudi LPG sales operate under confirmed letters of credit with 180-day payment terms. An analyst told The National that Aramco had issued a force majeure for at least some February loadings, meaning it would not be able to meet contractual delivery obligations this month. Force majeure declarations — legal notices that a party cannot fulfill contractual obligations due to extraordinary circumstances beyond their control — trigger complex renegotiation of financing terms. Buyers seeking replacement volumes face immediate cash requirements, as spot market suppliers typically demand sight letters of credit or cash-against-documents terms. The financing cost differential adds another $3-5 per ton to procurement expenses.

‍

India is expected to be the only major import market in Asia with steady demand growth, driven primarily by the residential sector. National oil companies have already secured term deals to import a combined 2.2 million mt of U.S. LPG in 2026, which could help to absorb some of the additional supply. However, historically, China sourced LPG from the U.S. while India relied largely on the Middle East, but a switch could emerge in 2026 if India continues to increase U.S. intake. Middle Eastern suppliers could lose Indian market share and redirect cargoes to China instead. This structural shift creates new arbitrage opportunities for traders capable of managing cross-basin cargo flows and currency hedging requirements.

‍

For observers monitoring this disruption's resolution: Track Saudi Aramco's monthly loading schedules from Ras Tanura and Yanbu terminals through May 2026. Any increase in loading frequency beyond normal 8-10 cargoes monthly indicates partial capacity recovery from alternative infrastructure. Monitor the Far East Index propane and butane price spread to Contract 2 — if the prompt month premium exceeds $25 per ton, physical supply tightness is accelerating beyond current projections. Watch for Indian Oil Corporation's next quarterly import tender results, typically announced 45 days before delivery. Any tender awards exceeding 150,000 tons monthly from non-Middle East suppliers signals permanent supply chain restructuring rather than temporary replacement sourcing.