Escalating military conflict in the Middle East has added gasoline to a bullish setup for US LPG exporters. East Daley Analytics expects near-term dislocation in the global LPG market resulting from the war and a key terminal outage, creating upside for several companies.
The US and Israel launched joint strikes against Iran over the weekend, killing the country’s supreme leader, Ayatollah Ali Khamenei. Iran retaliated with a wave of drone and missile attacks targeting infrastructure in neighboring states, effectively shutting tanker traffic through the Strait of Hormuz.
The Middle East hostilities follow a recent outage at the Juaymah LPG terminal in Saudi Arabia. On Feb. 23, Saudi Aramco halted LPG exports after finding damage to part of its delivery system.
According to Vortexa ship tracking data, Juaymah exports average more than 170 Mb/d, with February volumes tracking closer to 180 Mb/d prior to the disruption. A significant share of those barrels move to India, the same demand center where US suppliers have been working to expand market share.
For perspective, US LPG exports to India have reached highs near 180 Mb/d but more frequently remain below 100 Mb/d. Juaymah alone represents a swing supplier equivalent to the full upside case for US shipments to India.
According to East Daley’s NGL Hub Model, all major US Gulf Coast terminals have exposure to India, including Energy Transfer’s (ET) Nederland, Enterprise’s (EPD) EHT, Targa Resource’s (TRGP) Galena Park and Phillips 66’s (PSX) Freeport. Even Marcus Hook in the Northeast has placed cargoes in the subcontinent. The infrastructure and supply are available. The key variables are price and freight.
Mont Belvieu pricing is relatively weak relative to Saudi propane (shown in figure), keeping US LPG competitive on a delivered price basis. Freight costs to India are higher than from the Middle East, which compresses delivered margins.
East Daley expects near-term upside in US export volumes, particularly from terminals with open capacity such as ET – Nederland and EPD – EHT. If the Juaymah outage and Strait of Hormuz closure drag on, India and other Asian customers will need ready supply and flexibility. The US is the only supplier positioned to respond quickly.
The duration of the disruptions will determine whether this is a brief trade opportunity or a more durable shift in flows. – Julian Renton Tickers: EPD, ET, PSX, TRGP.
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