The Indian government’s decision to reduce subsidies for residential LPG usage following national elections may lead to decreased demand.
This decrease could coincide with increased LPG export availability from the Middle East in the coming months, according to the ship-tracking agency, Vortexa.
According to Vortexa’s data, exports of liquefied petroleum gas hit a record high of 1.49 million barrels per day in March, rising by 200,000 barrels a day on a year-on-year basis.
Exports hit record highs
Exports hit a record high ahead of the Organization of the Petroleum Exporting Countries and allies’ scheduled oil output increase from April.
The LPG export increases were led by the United Arab Emirates, shipping 132,000 barrels per day more than the previous month, and non-OPEC member Qatar exporting 62,000 barrels per day more than February.
Analysts at Vortexa had previously estimated the resulting impact of the unwound OPEC cuts on regional LPG sendout would be minimal–an additional Very Large Gas Carrier (VLGC) per month from April onwards–and expect that April exports might struggle to match the highwater mark set in March.
The overall import appetite is likely to be dampened by the seasonal demand slump in April; conversations with buyers indicate that H1 April requirements were quite thin, according to Samantha Hartke, head of market analysis – Americas at Vortexa.
“The second half may only fare slightly better given several major players will only return to their desks later this week after their Ramadan breaks and face a narrow window in which to peg down fixtures,” she said.
Additionally, Saudi Aramco’s April LPG programme looked tighter, given the cut in tolerances to two of its major buyers.
Conversely, the sequential uptick from UAE likely came from the increased utilisation of its Al-Hosn gas plant, while Qatar will likely be keen to keep up the competition with UAE for market share to the Far East.
Lack of LPG subsidy in India
India, the largest buyer of Middle Eastern LPG, receiving 59% of the region’s exports in Q1 2025, could hinder increased sendout from the Middle East.
This is an increase from 57% on average last year and 52% in 2023, according to Vortexa data.
India’s overall LPG demand saw a significant year-on-year increase of 6.4% in 2024, averaging 986,000 barrels per day, compared to a growth rate of 1.5% in 2023, averaging 926,000 barrels a day, as per government data.
“It is unlikely that the 2024 increase will be repeated this year,” Hartke said.
Last year’s federal elections in India witnessed a wave of LPG subsidies and free cylinders being distributed to voters, given that residential LPG usage accounts for 92% of the total LPG consumption in the country.
The government surpassed its goal of enrolling 7.5 million new beneficiaries in the Pradhan Mantri Ujjwala Yojana (PMUY) subsidy program last year, achieving this milestone several months ahead of the projected timeline.
“Subsidies for residential cylinders are crucial to supporting LPG consumption growth in the country,” Hartke added.
The subsidies provided to low-income households in India will be reduced by 36 billion rupees ($421 million, or 28%).
Overall household subsidies will be reduced by 26 billion rupees ($304 million, or 18%).
These reductions will be in effect from April 2025 as part of India’s 2025-26 budget.
Oil companies affected
State-owned oil companies in India have incurred substantial losses, approximately $4.7 billion, due to government subsidies.
These subsidies require them to sell their products significantly below international market prices, placing them in a difficult financial position, according to India’s 2024 fiscal year budget data.
“Without a federal election in sight for the next five years, it will be up to the individual states to provide some sort of relief to its constituents, although this is expected to be nowhere near the more extensive compensation provided under the federal scheme,” Hartke said.
While monthly residential cylinder prices in India have remained unchanged since March 2024, we find it difficult to see how this dynamic could persist given the reduction in residential subsidies.
Hartke said.:
Ultimately, while the Middle East will continue to prioritise exports to India, slowing demand growth from that country could well see regional suppliers diversifying their sendout into Northeast and Southeast Asia.
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