Renewed US-Iran Tensions Cast Doubt on High LPG Cracking Plans for August: OPIS Poll
Market participants are not optimistic that planned LPG cracking volumes across Asian crackers will be sustained through August, citing renewed U.S.-Iran tensions that have clouded the outlook for Middle East feedstock availability, according to the latest monthly OPIS cracking survey concluded on July 10.
Planned August LPG cracking volumes total 442,000 metric tons, comprising 289,000 mt of propane and 153,000 mt of butane, marking the highest monthly cracking volume since December 2025.
July’s revised cracking volumes are at 403,000 mt, up from an earlier plan of 397,000 mt. Actual June cracking volumes totaled 281,000 mt of propane and 136,000 mt of butane.
Peace deal initially boosts feedstock confidence
Cracker operators said that June’s U.S.-Iran peace deal initially improved market sentiment by easing uncertainty surrounding Middle East LPG supply, resulting in greater confidence in raising August’s cracking volumes.
Prior to the agreement, many cracker operators had adopted a wait-and-see approach as the conflict fueled price volatility and raised concerns over potential disruptions to regional LPG supply. Uncertainty surrounding feedstock availability prompted many operators to delay procurement and lower operating rates.
The peace deal eased those concerns, encouraging buyers to return to the market. OPIS tracked a total of 12 LPG buy tenders issued across Asia following the peace deal.
One South Korean cracker operator noted that while most domestic crackers are not expected to take Middle East cargoes, the peace deal provided reassurance over overall feedstock availability. Most operators had already established stable alternative feedstock supply sources, primarily from the U.S., by late May to June.
Total planned LPG consumption by South Korean cracker operators stands at 311,000 mt in July and 304,000 mt in August.
Price drop spurs buying interest
Easing supply concerns also resulted in a decline in LPG prices as geopolitical risk premiums retreated, improving cracking economics and supporting buying interest.
OPIS assessments showed the CFR Japan propane flat price averaged $597/mt during the second half of June, down from an average of $796/mt in the first half.
The spread between the Far East propane and the Japan naphtha swap also widened. The prompt-month spread stood at minus $80.95/mt on Friday, widening from minus $52.76/mt a month earlier, broker data shows. Discounts wider than minus $50/mt typically encourage crackers to switch from naphtha to LPG as it becomes the cheaper feedstock, sources said.
Some operators noted higher butane consumption as prices declined and availability improved following expectations of returning Middle East supply.
During the conflict, alternative U.S. cargoes, which are predominantly propane-rich, accounted for a larger share of Asian imports, tightening butane availability and supporting a higher physical premium over propane. The return of Middle East evenly split propane-butane cargoes following the peace deal subsequently improved butane availability and eroded the premium.
OPIS assessments showed the physical butane premium over propane rose to around $70/mt in mid-March after the conflict began and peaked at $130s/mt in April. It then fell to around $30/mt in mid-June following news of the memorandum of understanding. By late June after the peace deal, butane was trading at a parity with propane.
The survey showed planned butane cracking volumes rising to 153,000 mt in August from 145,000 mt planned in July and actual June volumes of 136,000 mt.
Vortexa data showed imports of evenly split propane-butane cargoes into Asia reaching a record 697,600 mt in July, up from 418,100 mt in June, as Middle East cargo flows resumed. Total butane imports into Asia rose to 2.51 million mt in July from 1.49 million mt in June.
Renewed U.S.-Iran tensions cloud cracking outlook
Despite the higher planned August cracking volumes, market participants said the renewed U.S.-Iran tensions has thrown the market into uncertainty once again, with many casting doubts on whether current cracking plans can be maintained.
“Prices have started climbing again, especially after President Trump declared the peace deal over on Wednesday. If we go back into war, we will likely stop buying, reduce operating rates and scale back cracking volumes,” one Southeast Asian cracker operator said.
Following President Donald Trump’s announcement, the CFR Japan propane flat price rose $43.75/mt from the previous day’s close of $635.50/mt. Market participants added that the earlier wave of buying following the peace deal had also contributed to the rebound in prices.
Some brokers also noted butane prices had started to strengthen again amid renewed concerns over Middle East supply. Physical butane cargoes are marked at a $10/mt premium over propane on Friday.
OPIS assessments showed the CFR Japan propane and naphtha flat prices closed at $643.50/mt and $747.75/mt, respectively, on Thursday, down from $749/mt and $746/mt a month earlier.
Methodology: OPIS, a Dow Jones company, collects Asia-based petrochemical companies’ feedstock consumption plans for the current and next month, as well as actual consumption in the previous month. OPIS contacts feedstock procurement officers for the survey by phone, email or messages in the last week of the previous month or the first week of the current month. OPIS may use proxy data based on the best market information available for minor missing entries due to non-response by a stipulated deadline. Such proxies should not alter the overall trend or deviate from the general behaviors of most participants.
—Reporting by Cheryl Lee, clee@opisnet.com and Yiwen Ju, yju@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com