LPG prices on Russian domestic market halve after EU embargo

Domestic prices for liquefied petroleum gas (LPG) in Russia halved in December compared to the previous month due to an oversupply of fuel.

Source: Reuters  

Details: The surplus resulted from the European Union's sanctions, which curtailed LPG exports from Russia. Reuters offers this information based on its own calculations.

EU sanctions on Russian LPG went into force on 20 December. Poland, one of the biggest importers of Russian LPG, suggested restrictions.

LPG, which includes propane and butane, is widely used as a fuel for cars, heating, and the synthesis of other petrochemicals.

The increase in LPG supplies to the Russian domestic market has led to a sharp drop in wholesale prices: in December, the price fell to around RUB 14,000 (approx. US$140) per tonne from RUB 28,000 (US$280) at the end of November.

Exporting LPG is more profitable for Russia, as supplies to Poland could bring up to US$230 per tonne.

However, some types of Russian LPG are still allowed to be exported, but they account for only about a fifth of the total LPG exports that Russia used to make.

Industry representatives noted that Russia had increased its LPG exports in recent months to China, Mongolia, Armenia, Georgia and Azerbaijan. Traders note that exports to China have the potential for further growth.

Russia also supplies LPG to Afghanistan, although market participants report problems with payment. "We would be ready to supply it there, but our Afghan partners are prepared to pay only in cash. And then what should we do with this 'cash'? Additional questions and problems may arise while bringing it back to the Russian Federation," a trader said.

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