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The long awaited supply demand balance in the crude oil market has finally shown signs of arrival. From around $55/barrel at the start of October, Brent crude price has crossed $60 in late October and is now hovering around $63. The future market of crude oil is shifting from contango (upward movement) to backwardation (falling market). The demand side is showing a rosy picture with the surge in global growth rate leading to increase in global crude consumption. On the other hand, supply side has dwindled owing to OPEC’s production cuts and disruptions in US crude oil by natural calamities. Shale oil supply has also stagnated with the shale industry showing signs of slowdown due to the decreasing profitability in the extraction process.
Although the crude oil market has started showing signs of stabilized growth rates with decreased volatility which had been a noticeable trend in the last 3 years, decisions taken in the upcoming OPEC conference on 30th November will pave the path for 2018.
LPG prices are also volatile in tune with crude price movements particularly in H2 - 2017 and the same is expected to continue during H1- 2018. As per market analysts, prices may be in the range of $500 - $600 during H1- 2018. Higher LPG consumption, particularly in Asia has boosted “Sea Borne Trade” resulting in demand for more ships and hence Ocean freight rates are expected to rise in the short / medium term.