In January 2026, Saudi Aramco's announced Contract Price (CP) for propane and butane recorded a second consecutive monthly increase, with the rise exceeding market expectations. On January 5, the benchmark price for liquefied petroleum gas (LPG) on the business platform was 4,415.00 RMB/ton, representing a 1.32% increase compared to the beginning of the month (4,357.50 RMB/ton).

I. January CP Exceeds Expectations in Rising, with Tight Supply as the Main Driver
According to the released data, the January 2026 CP for propane was set at $525/ton, up $30 month-on-month, while butane was set at $520/ton, up $35 month-on-month. This final value was approximately $20/ton higher than the recommended values from market institutions, indicating an unexpected surge. The core driver behind this price increase was the tight spot supply in the Middle East in January. Specifically, Saudi Aramco faced its own supply constraints, Kuwaiti suppliers had no available spot sales for January shipments, and some January shipment plans from Abu Dhabi National Oil Company (ADNOC) were delayed. The combination of these factors raised concerns about spot supply for January, thereby pushing up CP expectations. Additionally, the fluctuating upward trend in the landed price of South China frozen cargoes (CFR) in December provided further support for the CP increase.

II. Month-on-Month Increase but Significant Year-on-Year Decline, with Long-Term Prices at Low Levels
Although the January CP achieved a consecutive month-on-month increase, when viewed over a longer period, the current price level remains significantly lower than the same period last year. Data shows that the price of propane in January 2026 fell by $100/ton year-on-year, a decline of 16%, while butane decreased by $95/ton year-on-year, a drop of 15.45%. Additionally, the price spread between propane and butane is narrower than it was during the same period last year. This reflects that, compared to early 2025, the overall price level in the LPG market has shifted significantly lower, and the current increase is more of a rebound from a relatively low base.

III. Limited Guidance from Crude Oil, Future Trends to Depend on Supply and Demand Dynamics
In December, international crude oil prices generally fluctuated within a range, providing limited direct guidance for the LPG market. The crude oil market is influenced by a mix of bullish and bearish factors: on one hand, concerns about oversupply and economic prospects exert downward pressure; on the other hand, uncertainties in Middle East geopolitical tensions provide support. It is expected that crude oil prices will continue to fluctuate in January, making it difficult to provide a one-sided trend-driven direction for LPG. Therefore, the future trajectory of the LPG market will depend more on changes in its own supply and demand fundamentals. Based on current market signals, the likelihood of future downward pressure is increasing.

Comprehensive Outlook
In summary, the rise in January CP is the result of short-term supply-side disruptions and seasonal demand dynamics. Looking ahead, expectations of new production capacity on the supply side and the seasonal weakening of demand jointly constitute downward pressure on prices. On the cost side, the crude oil market is expected to remain volatile, making it difficult to provide strong support. Therefore, barring any unexpected events, after digesting the short-term positive factors in January, the CP price for February is likely to exhibit slight and weak fluctuations. Subsequent attention should focus on the actual production release progress of the Jafurah gas field and changes in spring temperatures.