JULY 2026

Market Intelligence & Insights
Black Swan Global

STRATEGY PAPER

Investment Thesis

The case for new refining capacity has become more selective—not less strategic. Global refining capacity is already ample in aggregate, refined-product demand growth is slowing, and significant new capacity is scheduled through 2030. A new refinery therefore cannot be justified simply because a country imports fuel.

The stronger case emerges where a project solves a specific regional problem: persistent product deficits, vulnerable import routes, inadequate product specifications, weak storage integration, growing aviation or petrochemical demand, or the absence of reliable conversion capacity close to end markets.

The Numbers at a Glance

1. Capacity Alone Is Not the Opportunity

OPEC reported world refining capacity of 103.66 million b/d in 2025, while refinery throughput averaged 86.89 million b/d. The gap illustrates why global capacity statistics alone cannot justify investment in another refinery.

Figure 1. World refining capacity and refinery throughput in 2025. Source: OPEC Annual Statistical Bulletin 2026.

The relevant investment question is local and regional: does the target market have the right capacity, in the right location, producing the right products, with dependable access to crude, storage and distribution? A region can be structurally short of diesel or jet fuel even when the world has excess nameplate refining capacity.

2. A Tougher Global Refining Environment

IEA’s medium-term outlook points to a challenging competitive backdrop. Global refined-product demand is projected to peak in 2027 at 86.3 million b/d, only about 710,000 b/d above 2024. At the same time, 4.2 million b/d of new refining capacity is expected globally by 2030, partly offset by 1.6 million b/d of closures.

Figure 2. Expected global refining capacity additions and closures versus refined-product demand growth, 2024–2030. Source: IEA, Oil 2025.

This imbalance means new projects must compete against modern export refineries in Asia and the Middle East while higher-cost facilities in mature markets face pressure to close. A project built around generic gasoline and diesel output without a clear market advantage is therefore increasingly difficult to defend.

3. 2026 Changed the Meaning of Supply Security

The 2026 Gulf disruption demonstrated that crude availability and product availability can diverge sharply. By June, total Gulf oil exports had recovered to 16.1 million b/d, up strongly from the disruption lows but still below the pre-war average of roughly 24 million b/d.

Figure 3. Gulf oil exports: pre-war average versus June 2026. Source: IEA Oil Market Report, July 2026.

More importantly for refinery strategy, refined-product and LPG exports recovered much more slowly than crude flows. The IEA reported that key Gulf export refineries had yet to restart fully in June, contributing to tight product markets even as crude prices declined.

4. Where a Regional Refinery Can Create Real Value

5. Configuration Matters More Than Nameplate Capacity

A refinery should be designed backward from the market it intends to serve. The desired output slate determines crude selection, conversion complexity, hydrogen requirements, desulphurisation, utilities and capital intensity.

For a diesel-deficit market, middle-distillate yield and sulphur specifications may dominate. For an aviation hub, jet-fuel capability becomes more important. For an industrial or petrochemical cluster, naphtha, LPG, propylene or integrated petrochemical streams can materially change project economics.

The strategic error is to begin with a preferred refinery size and then search for a market. The stronger process begins with demand, product deficit and logistics, then determines the configuration and capacity required.

6. The Six Tests Before Feasibility

MARKET
Quantify current and forecast product deficits by grade—not total petroleum demand.

FEEDSTOCK
Establish realistic crude sources, quality ranges, pricing basis and supply security.

LOGISTICS
Validate port draft, jetties, tanks, pipelines, inland distribution and export optionality.

CONFIGURATION
Optimize yield against the actual product slate and future specification requirements.

ECONOMICS
Stress-test margins, freight, capex, financing, carbon costs and downside utilization.

OFFTAKE & POLICY
Identify credible buyers and understand pricing regulation, taxes, subsidies and strategic-stock requirements.

7. Regional Refining Is Not the Same as Self-Sufficiency

Complete fuel self-sufficiency is neither necessary nor always economic. International trade remains an efficient balancing mechanism, and even large refining centres import products when grades, maintenance schedules or relative prices make it attractive.

The more practical objective is resilience: sufficient domestic or regional conversion capacity to reduce excessive dependence on a single external supply chain, while retaining the flexibility to trade surplus and deficit products.

This hybrid model—domestic capability plus international trade—can provide greater security than either extreme.

8. What Investors Should Avoid

• Building capacity primarily to satisfy a political target without a durable product-market deficit.
• Assuming high disruption-era refining margins will persist throughout a multi-decade project life.
• Underestimating working-capital, inventory and crude-procurement requirements.
• Treating port, storage and distribution infrastructure as secondary to process-unit design.
• Using a single crude price, product crack or utilization assumption in the base investment case.
• Ignoring the long-term shift in transport-fuel demand and the competitive advantage of integrated petrochemical complexes.

BSG Strategic Perspective

The current environment does not support a blanket argument for more refineries. It supports a more disciplined argument for the right refinery in the right market.

A credible regional project should demonstrate three things simultaneously: a structural market need, a physical supply-chain advantage and an economic configuration capable of competing through the cycle.

This is why feasibility work must extend beyond engineering. Market intelligence, feedstock strategy, logistics, commercial structuring, financing and offtake should be developed alongside the technical concept from the earliest stage.

Outlook

Global refining is moving into a period of greater competition. New capacity in Asia and the Middle East will pressure less efficient plants, while refined-product demand growth slows and becomes increasingly concentrated in aviation and petrochemical-linked products.

At the same time, the 2026 disruption has increased the strategic value of reliable regional product supply. These forces are not contradictory. They mean that new refining investment must satisfy a higher standard.

Projects that combine advantaged feedstock, modern configuration, strong logistics, credible offtake and a genuine regional supply gap can still create strategic and commercial value. Projects without those advantages will face an increasingly difficult global market.

Sources & Data Notes

• OPEC, Annual Statistical Bulletin 2026, released 29 April 2026. Used for 2025 global refining capacity (103.66 mb/d), refinery throughput (86.89 mb/d), and broader refining context.
• International Energy Agency (IEA), Oil 2025 – Analysis and Forecast to 2030. Used for projected refined-product demand peak, new refining capacity additions, closures and regional refining outlook through 2030.
• International Energy Agency (IEA), Oil Market Report – July 2026, published 10 July 2026. Used for June 2026 Gulf export recovery, refinery-run conditions, product-market tightness and global refining outlook.

Publication Note

This publication is prepared by Black Swan Global – Market Intelligence & Insights as general market commentary. It is intended to support discussion of international energy-market and refining developments and does not constitute investment, financial, engineering, legal, trading or other professional advice. Any refinery investment requires project-specific technical, commercial, environmental, legal and financial feasibility studies.

JUNE 2026  |  BLACK SWAN GLOBAL

A BSG Market Brief examining why physical routes—not only commodity availability—have become central to energy security, trading strategy and delivered-cost risk.

The View in One Minute

Energy security is often discussed in terms of reserves, production capacity and inventories. The events of 2026 have reinforced another reality: energy is only secure when it can move.

Why Chokepoints Matter

A maritime chokepoint is a narrow route through which unusually large volumes of trade must pass. Its importance is not defined by geography alone, but by the combination of volume, limited alternatives and the economic cost of rerouting.

The Strait of Hormuz is the clearest energy example. EIA estimates that 20.9 million barrels per day of oil and petroleum liquids moved through the strait in 2025, equivalent to roughly one-fifth of global petroleum liquids consumption. LNG flows averaged about 11.4 billion cubic feet per day, or more than 20% of global LNG trade.

Figure 1. Scale of energy flows through the Strait of Hormuz in 2025. Source: U.S. Energy Information Administration. Units differ by commodity and are shown on the axis.

Four Routes, One Global System

Hormuz is not an isolated vulnerability. The global energy system relies on a network of narrow passages whose disruption can change voyage distances, freight demand, insurance costs, vessel availability and regional price relationships.

Figure 2. Selected oil chokepoint flows using EIA 2025/first-half 2025 estimates: Strait of Malacca 23.2 mb/d; Hormuz 20.9 mb/d; Suez Canal/SUMED 4.9 mb/d; Bab el-Mandeb 4.2 mb/d.

The Asia Exposure

The geographic distribution of Hormuz flows makes the issue especially important for Asian energy security. EIA estimates that 89% of crude oil and condensate transiting Hormuz in 2025 was destined for Asian markets. China, India, Japan and South Korea were among the principal destinations.

Figure 3. Destination of crude oil and condensate flows through Hormuz in 2025. Source: U.S. Energy Information Administration.

This concentration creates a direct link between Middle Eastern maritime security and Asian refining, power generation, petrochemical activity and household energy supply.

A Disruption Travels Through the Value Chain

1  ROUTE
Transit capacity falls or risk rises.

2  SHIPPING
Voyages lengthen; vessel and insurance costs increase.

3  PHYSICAL MARKET
Buyers compete for alternative origins and prompt cargoes.

4  PRICING
Regional differentials, freight and replacement premiums adjust.

5  DOWNSTREAM
Refiners, utilities, industries and consumers absorb the impact.

Not Every Barrel Can Be Rerouted

The existence of an alternative route does not mean it is an economic substitute. Rerouting can add sailing days, consume additional bunker fuel, reduce effective vessel availability and create congestion at alternative terminals.

For some Gulf producers, pipelines provide partial bypass capacity around Hormuz. Saudi Arabia’s East-West pipeline and the United Arab Emirates’ Abu Dhabi Crude Oil Pipeline can move crude to export points outside the strait. But bypass capacity is limited relative to total flows and does not replicate the flexibility of normal maritime transit for every commodity.

LNG, LPG and refined-product chains face their own infrastructure constraints. Product specification, refrigeration or pressurisation requirements, terminal compatibility and vessel class can make substitution more complex than crude-oil rerouting.

The New Economics of Delivered Supply

This changes procurement analysis. A cargo that appears cheaper at origin may become less competitive after a route disruption increases voyage duration or freight. Conversely, a geographically closer supplier can gain strategic value even at a higher headline commodity price.

For traders and institutional buyers, route analysis should therefore sit alongside benchmark pricing. Freight curves, vessel positions, terminal constraints and geopolitical developments are increasingly part of the commercial decision rather than post-trade logistics.

Five Resilience Questions for Market Participants

• Where are our critical physical chokepoints – not only our suppliers?
• What alternative origins can be activated without changing receiving infrastructure?
• How much inventory buffer exists if voyage time increases materially?
• Which contracts provide practical flexibility in origin, vessel, loading window or discharge point?
• Do procurement decisions compare full delivered economics under disruption scenarios?

BSG Perspective

The events of 2026 reinforce a broader change in international energy trade. Competitive advantage increasingly depends on the ability to connect market intelligence with physical execution.

Supply diversification remains important, but it is only one layer of resilience. Effective commercial planning must also account for route concentration, shipping, storage, terminal access, financing and contractual flexibility.

The practical objective is not to eliminate disruption risk. It is to build enough optionality that a disruption does not become a commercial dead end.

Outlook

Strategic chokepoints will remain central to global energy trade because geography and infrastructure cannot be redesigned quickly. The market response is therefore likely to focus on redundancy: alternative supply origins, bypass infrastructure, larger strategic inventories, flexible contracts and improved real-time visibility of physical flows.

For energy-importing economies, especially in Asia, the question is moving beyond ‘Where does our energy come from?’ toward a more demanding question: ‘How many viable ways do we have to receive it?’

Sources & Data Notes

• S. Energy Information Administration (EIA), World Oil Transit Chokepoints / Strait of Hormuz analysis, 2026. Used for 2025 Hormuz oil and LNG flows, share of global consumption/trade, destination exposure and bypass-pipeline context.
• S. Energy Information Administration (EIA), international chokepoint estimates for the Strait of Malacca, Suez Canal/SUMED and Bab el-Mandeb, using 2025 or first-half 2025 flow estimates as reported by EIA.
• International Energy Agency (IEA), 2026 market commentary on disruptions to energy and LPG flows through the Strait of Hormuz. Used as contextual background on physical-market transmission and Asian exposure.

Publication Note

This publication is prepared by Black Swan Global – Market Intelligence & Insights as general market commentary. It is intended to support discussion of international energy-market developments and does not constitute investment, financial, legal, trading or other professional advice. Data are drawn from publicly available sources considered reliable at the time of publication. Market conditions can change rapidly.

May 2026

Market Intelligence & Insights
Black Swan Global

Executive Summary

Global fertilizer markets entered May 2026 with pressure building across three interconnected layers: physical supply, production inputs and maritime logistics. The disruption of Gulf exports through the Strait of Hormuz has affected urea and phosphate fertilizers directly, while tighter natural gas and sulphur availability has increased production costs and constrained output beyond the Middle East.

The World Bank fertilizer price index rose more than 12% in the first quarter of 2026 and reached its highest level since 2022 in March. Urea was at the centre of the shock: its benchmark averaged about US$725 per metric ton in March, nearly 55% above February. The World Bank’s April outlook projected the fertilizer index to rise 31% in 2026 and urea prices by nearly 60%, subject to substantial upside risk.

The market’s vulnerability reflects concentration. In 2024, the Middle East accounted for almost one-quarter of global urea exports and more than 15% of ammonia exports. The phosphate chain is exposed as well: roughly 15% of global DAP exports, one-third of global sulphur trade and around 15% of ammonia trade pass through the Strait of Hormuz.

For importing economies, the strategic issue is therefore broader than fertilizer pricing. Higher input costs, disrupted cargo flows and reduced application rates can ultimately affect crop yields and food affordability. Fertilizer resilience is increasingly becoming part of food-security policy.

Key Market Signals

1. A Fertilizer Shock with Multiple Transmission Channels

The 2026 fertilizer shock differs from a simple shortage of finished product. It is simultaneously affecting fertilizer exports, feedstock availability, production economics and shipping.

Nitrogen fertilizers are particularly energy intensive because ammonia is produced primarily from natural gas. Phosphate fertilizers depend on a different but equally interconnected chain involving phosphate rock, ammonia and sulphur. Disruption to any one of these inputs can reduce production or raise the marginal cost of finished fertilizer.

This creates a multiplier effect: an energy shock can become a fertilizer shock, and a fertilizer shock can later become an agricultural and food-price shock.

Figure 1. Selected fertilizer market indicators for 2026. Sources: World Bank Commodity Markets Outlook, April 2026; World Bank fertilizer market update, May 2026.

2. Urea: The Most Immediate Point of Stress

Urea has been the most visibly affected major fertilizer. The Middle East is a large, low-cost production centre and a major exporter, supported by access to natural gas and established maritime infrastructure.

According to the World Bank, Middle Eastern producers accounted for almost one-quarter of global urea exports in 2024. The near-halt in regional exports following the closure of the Strait of Hormuz therefore removed a significant volume from the internationally traded market at the same time as Northern Hemisphere spring demand was strengthening.

Production constraints amplified the logistics shock. The World Bank reported interruptions to ammonia production in Iran, suspension of urea and ammonia production in Qatar following damage to facilities, and reduced urea and ammonia output in India as LNG availability declined.

Figure 2. Middle East share of global urea and ammonia exports in 2024. Source: World Bank, citing International Fertilizer Association data.

3. Natural Gas Links Energy Security to Fertilizer Security

Natural gas is not merely an energy source for the fertilizer industry; it is a principal feedstock for ammonia. The World Bank estimates that natural gas accounts for approximately 80-90% of ammonia production costs.

This means a gas-market disruption can affect fertilizer supply even in countries that are not direct importers of Gulf urea. Higher LNG and natural gas prices raise production costs in Europe and Asia, while shortages can force plants to reduce operating rates.

The consequence is a wider geographic transmission of the original shock. A disruption centred on the Gulf can tighten fertilizer availability in South Asia or Europe through both trade and production channels.

4. Phosphate Fertilizers: Exposure Beyond Urea

The phosphate market faces a different but important set of vulnerabilities. Diammonium phosphate (DAP) production depends on ammonia and sulphur in addition to phosphate rock, making it sensitive to disruptions in internationally traded feedstocks.

World Bank analysis estimates that nearly 15% of global DAP exports transit the Strait of Hormuz, together with about one-third of global sulphur trade and around 15% of ammonia trade. This creates exposure on both the finished-product and feedstock sides of the phosphate chain.

Figure 3. Approximate share of global DAP, sulphur and ammonia trade transiting the Strait of Hormuz. Source: World Bank Commodity Markets Outlook, April 2026.

This matters particularly for large phosphate producers that rely on imported sulphur or ammonia. The World Bank noted that OCP in Morocco brought forward maintenance on phosphate production during the second quarter, likely reflecting disruptions to these inputs.

5. Trade Policy Can Magnify Physical Tightness

Physical disruption is only one part of the risk. When domestic fertilizer prices rise, major producing countries may restrict exports to protect local agricultural markets. Such measures can tighten internationally available supply even when global production has not materially declined.

China remains especially important because of its scale in nitrogen and phosphate fertilizers. The World Bank noted reports of potential curbs on Chinese fertilizer exports during the second quarter of 2026, while exports in the first two months of the year remained well below levels seen earlier in the decade.

For importers, this reinforces the need to assess policy risk alongside production and freight. A diversified supplier base is less effective if several major origins simultaneously prioritize domestic availability.

6. From Fertilizer Affordability to Food Security

The most important consequence may emerge with a lag. High fertilizer prices compress farm margins and can cause farmers to reduce application rates, postpone purchases or shift toward less fertilizer-intensive crops.

The World Bank warns that sustained high fertilizer costs can reduce future crop yields and tighten food supply. The precedent is recent: during the 2021-22 fertilizer shock, nitrogen use per hectare in Sub-Saharan Africa fell materially, while potash application declined sharply in South Asia.

The 2026 shock therefore has a timing dimension. Commodity markets may stabilize before the agricultural effects are fully visible. Decisions made by farmers during planting and application windows can influence yields months later.

7. Strategic Implications for Importing Markets

01 | Diversify origin
Avoid excessive reliance on one producing region, especially for essential seasonal requirements.

02 | Secure feedstocks as well as finished fertilizer
For integrated producers, ammonia, sulphur and natural gas exposure can be as important as finished-product availability.

03 | Build procurement around crop calendars
Fertilizer is time-sensitive. A cargo delivered after the application window may have materially lower agricultural value.

04 | Maintain logistics optionality
Evaluate alternative loading regions, vessel sizes, ports, storage and inland distribution before disruptions occur.

05 | Monitor trade policy
Export restrictions and domestic-priority measures can alter available supply rapidly.

06 | Link fertilizer strategy to food security
Governments and institutional buyers should assess fertilizer availability as part of wider agricultural resilience, not as an isolated commodity purchase.

Outlook

The World Bank’s baseline assumes that the most acute Middle East supply disruptions ease around mid-2026, allowing fertilizer availability to improve later in the year. Under that scenario, prices remain elevated in 2026 before easing as trade recovers and additional capacity comes online.

The risks, however, remain asymmetric. A prolonged restriction on Hormuz shipping, further damage to production facilities, higher natural gas prices or additional export controls could keep nitrogen and phosphate markets tighter for longer.

The strategic lesson is clear: fertilizer security depends on more than securing a seller. It depends on access to diversified production, feedstocks, shipping, storage, financing and timely delivery. In a volatile market, the ability to coordinate these elements is becoming central to agricultural resilience.

Sources & Data Notes

• World Bank Group, Commodity Markets Outlook, April 2026. Data cutoff: 20 April 2026. Used for fertilizer price changes, 2026 forecasts, Middle East export shares, natural-gas cost exposure, DAP/sulphur/ammonia trade exposure and food-security transmission.
• World Bank Group, “Fertilizer prices surge as Strait of Hormuz disruptions tighten supplies,” 14 May 2026. Used as a May 2026 update confirming the fertilizer index reached its highest level since October 2022 by April and for current market context.
• International Fertilizer Association data as reproduced and discussed by the World Bank. Used for 2024 Middle East shares of global urea and ammonia exports.
• FAOSTAT and World Bank analysis as cited in the April 2026 Commodity Markets Outlook. Used for historical fertilizer-use and food-security context.

Publication Note

This publication is prepared by Black Swan Global – Market Intelligence & Insights as general market commentary. It is intended to support discussion of international energy, fertilizer and commodity-market developments and does not constitute investment, financial, legal, trading or other professional advice. Data are drawn from publicly available sources considered reliable at the time of publication. Market conditions can change rapidly.

The disruption to Middle Eastern LPG flows in early 2026 has accelerated a reassessment of how the global market balances supply. The central issue is no longer simply whether alternative molecules exist. It is whether those molecules can be redirected, financed, shipped, received and stored quickly enough to protect end-user markets from a regional supply shock.

The United States has become the most important source of incremental flexibility. U.S. propane exports averaged a record 1.8 million barrels per day in 2025, while normal butane exports approached 535,000 b/d. Asian destinations remain central to this trade: China, Japan and South Korea were among the five largest destinations for U.S. natural gas plant liquids, while U.S. propane exports to India increased from roughly 2,000 b/d in 2024 to 41,000 b/d in 2025.

Yet diversification has limits. Nearly 88% of U.S. propane exports in 2025 originated from the Gulf Coast, creating a different form of infrastructure concentration. Longer voyages to Asia, vessel availability, terminal compatibility, freight economics and contractual rigidity can all slow the rebalancing process.

The emerging LPG market is therefore moving from a model of lowest-cost sourcing toward a broader model of portfolio resilience: multiple origins, flexible logistics, adequate storage and contracts capable of adapting when established trade routes are disrupted.

Key Market Signals

1. From Supply Availability to Deliverability

The first lesson from the 2026 disruption is that global supply cannot be assessed only by production volume. A market may have sufficient LPG in aggregate and still experience shortages when export capacity, vessel availability, voyage time or receiving infrastructure prevents product from reaching the required market.

This distinction between availability and deliverability is fundamental. Resilience depends on the entire chain: production, export terminal, vessel, route, import terminal, storage and final distribution. A weakness at any point can convert a regional interruption into a wider commercial problem.

2. The United States as the Principal Balancing Source

The expansion of U.S. natural gas liquids has materially changed the global LPG system. Propane exports increased from 1.262 million b/d in 2020 to 1.813 million b/d in 2025. This growth has given buyers in Asia, Europe, Latin America and Africa access to a large alternative supply pool.

Figure 1. U.S. propane exports, 2020–2025. Source: U.S. Energy Information Administration, Petroleum Supply Monthly.

The importance of U.S. supply is increasingly visible in destination patterns. EIA reported that India increased U.S. propane imports sharply in 2025, while additional growth was recorded across markets including Vietnam, Singapore and Indonesia. This suggests that diversification was already underway before the 2026 shock.

3. Diversification Does Not Eliminate Concentration

Alternative sourcing can reduce dependence on one producing region, but it can also shift concentration elsewhere. In 2025, approximately 1.594 million b/d of U.S. propane exports originated from the Gulf Coast, compared with total U.S. exports of 1.813 million b/d.

Figure 2. U.S. propane exports by export region, 2025 average. Source: U.S. Energy Information Administration.

This concentration reflects the strength of Gulf Coast processing, storage and terminal infrastructure, but it also highlights an important principle: supply diversification should be evaluated across both origin and logistics. A diversified supplier portfolio that depends on a single export corridor remains exposed to infrastructure and weather risk.

4. Asia Is Rewriting the Trade Map

Asia remains the principal demand centre shaping global LPG trade. Japan and South Korea are established importers, while India, Indonesia and other emerging markets are increasingly important because of household energy demand and petrochemical consumption.

Figure 3. Selected Asian destinations for U.S. propane in 2025. Source: U.S. Energy Information Administration. China is excluded from this figure because this chart uses only the destination values reproduced in the cited annual EIA table extract.

The trade map is therefore becoming more flexible. Middle Eastern supply retains a natural freight advantage into Asia, while U.S. cargoes provide scale and diversification. The commercial challenge for importers is to balance those advantages rather than treating one origin as a complete substitute for another.

5. Freight Becomes Part of the Commodity Decision

When supply is rerouted over longer distances, freight ceases to be a secondary logistics cost and becomes part of the commodity decision itself. Longer-haul replacement cargoes increase tonne-mile demand, tie up vessels for longer periods and can alter delivered economics even when the underlying product is competitively priced.

For buyers, this means comparing delivered supply options on a full-chain basis: benchmark price, differential, freight, terminal charges, inventory requirements, financing cost and operational risk. The lowest FOB price is not necessarily the most resilient or competitive delivered solution.

6. Contractual Flexibility Is Becoming a Strategic Asset

Traditional procurement structures often optimize for stable trade routes. A more volatile environment rewards optionality. Contracts that permit alternative origins, flexible loading windows, tolerance in parcel size or adaptable delivery arrangements can provide significant value when physical markets are disrupted.

This does not imply abandoning long-term supply relationships. Rather, it suggests that long-term relationships and flexible execution should increasingly coexist. The strongest procurement portfolios are likely to combine dependable core supply with alternative sources that can be activated when required.

7. A Framework for LPG Supply Resilience

01 | Multiple supply origins
Maintain access to more than one major producing region where commercially practical.

02 | Logistics optionality
Assess vessel class, route alternatives, terminal compatibility and discharge capability before disruption occurs.

03 | Strategic inventory
Use storage as a resilience tool rather than only as an operational buffer.

04 | Flexible contracting
Build practical optionality into origin, timing, quantity and delivery arrangements.

05 | Delivered-cost intelligence
Compare total landed economics, not headline commodity prices alone.

06 | Market intelligence
Track physical flows, freight, inventories, geopolitical risk and terminal constraints alongside benchmark pricing.

Outlook

The rebalancing of global LPG trade is unlikely to produce a simple replacement of Middle Eastern supply by U.S. supply. The more probable outcome is a more diversified and interconnected system in which buyers maintain access to multiple origins and place greater value on logistics flexibility.

Middle Eastern producers will remain central to Asian supply because of scale and geographic proximity. U.S. exporters will remain critical as an incremental balancing source. Other regional suppliers can provide additional optionality. The strategic advantage will increasingly belong to market participants capable of combining these sources efficiently.

For the global LPG market, resilience will not come from one new trade route. It will come from a portfolio of routes, suppliers, infrastructure and commercial options.

Sources & Data Notes

• S. Energy Information Administration (EIA), Propane Exports by Destination, annual data through 2025. Used for selected Asian destination volumes.
• S. Energy Information Administration (EIA), Propane Exports by PAD District, annual 2025 data released 31 March 2026. Used for U.S. Gulf Coast export concentration.
• International Energy Agency (IEA), March 2026 analysis of LPG supply disruption and clean-cooking exposure. Used as contextual background carried forward from BSG Market Insight 001.

Publication Note

This publication is prepared by Black Swan Global – Market Intelligence & Insights as general market commentary. It is intended to support discussion of international energy-market developments and does not constitute investment, financial, legal, trading or other professional advice. Data are drawn from publicly available sources considered reliable at the time of publication. Market conditions can change rapidly.

The global liquefied petroleum gas (LPG) market entered March 2026 under exceptional stress. A sharp disruption to shipping through the Strait of Hormuz exposed a structural weakness in a market that has become highly international, yet remains dependent on a limited number of producing regions, export terminals and maritime corridors.

In 2025, 30% of global seaborne LPG exports transited the Strait of Hormuz. In March 2026, LPG exports through the strait fell by around 80%, from an average 1.5 million barrels per day in 2025 to about 0.3 million barrels per day. The shock was therefore not simply regional: it affected Asian supply security, global replacement economics, shipping demand and the allocation of alternative Atlantic Basin cargoes.

The central conclusion of this Market Insight is that LPG security can no longer be assessed only in terms of commodity availability and price. Supply-source diversification, storage, terminal flexibility, vessel availability, contractual optionality and access to timely market intelligence are becoming integral components of resilience.

Key Market Signals

1. A Globally Connected Market with Concentrated Supply

LPG sits at the intersection of household energy, industrial consumption and petrochemical feedstock demand. Propane and butane are widely used for cooking and heating, while petrochemical consumers use LPG as a feedstock for propylene, ethylene and other products.

The international market has benefited from a major expansion of U.S. natural gas liquids production. U.S. propane exports rose from 1.262 million b/d in 2020 to 1.813 million b/d in 2025, reinforcing the United States as a major source of incremental global supply.

Figure 1. U.S. propane exports, 2020–2025. Source: U.S. Energy Information Administration (EIA), Petroleum Supply Monthly.

Growth in U.S. exports has improved global supply diversity, but it has not removed concentration risk. The Middle East remains a major supplier to Asian markets, while U.S. export infrastructure is itself concentrated heavily on the Gulf Coast. The global system is therefore diversified by origin, but still dependent on a relatively small number of high-capacity export corridors.

2. The Strait of Hormuz: LPG’s Underappreciated Chokepoint

The Strait of Hormuz is normally discussed through the lens of crude oil and LNG. The 2026 disruption demonstrated that LPG exposure is also strategically significant.

IEA analysis indicates that 30% of all seaborne LPG exports transited the Strait of Hormuz in 2025. Almost all Middle Eastern LPG exported that year was delivered to Asia, linking a geographically narrow chokepoint to large residential and petrochemical demand centres.

Figure 2. Share of global seaborne LPG exports transiting the Strait of Hormuz in 2025. Source: International Energy Agency (IEA), based on Kpler data.

3. From Regional Disruption to Global Supply Shock

The scale of the March disruption was immediate. LPG exports through Hormuz fell from an average of approximately 1.5 million b/d in 2025 to about 0.3 million b/d in March 2026 – a decline of around 80%.

Figure 3. Average daily LPG exports through the Strait of Hormuz: 2025 average versus March 2026. Source: International Energy Agency (IEA).

A physical interruption of this magnitude forces buyers to compete for replacement molecules from other regions. That competition is transmitted through cargo premiums, freight, vessel availability, voyage duration and terminal scheduling. In an interconnected LPG market, the impact therefore extends beyond the countries directly dependent on Gulf supply.

4. Asia’s Exposure: LPG as an Energy-Security Commodity

The implications are particularly significant in developing Asia, where LPG is not merely a traded hydrocarbon but an essential household fuel. The IEA estimates that around 3.4 billion people across the developing world use LPG as their primary cooking fuel, including almost 2.4 billion people in developing Asia.

India and Indonesia illustrate the social dimension of supply security. The IEA reports that around 80% of Indian households and 90% of Indonesian households rely on LPG for cooking. In India, around two-thirds of LPG consumed in 2025 transited the Strait of Hormuz.

This changes the nature of the risk. A prolonged disruption is capable of moving rapidly from a commodity-market issue to a household energy-security issue, particularly where import dependence is high and storage buffers are limited.

5. The United States as a Balancing Supplier – with Limits

The United States has become increasingly important to global LPG balancing. EIA data show that U.S. propane exports reached 1.813 million b/d in 2025, while total U.S. natural gas plant liquids exports reached 3.1 million b/d. U.S. normal butane exports also reached a record of nearly 535,000 b/d in 2025.

However, alternative production does not automatically equal immediately deliverable supply. Replacement cargoes remain constrained by export terminal slots, VLGC availability, longer voyages to Asia, freight economics and receiving-terminal compatibility. The relevant measure of resilience is therefore not only how much LPG exists globally, but how quickly it can be redirected and physically delivered.

6. Five Fundamental Challenges

01 | Supply concentration
A substantial share of internationally traded LPG originates from a limited number of producing regions and export systems.

02 | Strategic chokepoints
High-volume maritime corridors can transmit regional geopolitical events directly into global physical markets.

03 | Infrastructure rigidity
Export terminals, receiving terminals, storage and vessel availability limit the speed at which trade flows can be rebalanced.

04 | Import-dependent demand
For major Asian economies, LPG is tied directly to household energy security as well as industrial and petrochemical consumption.

05 | Price and freight volatility
Physical disruption can be amplified by replacement premiums, longer voyage economics and competition for vessels and cargoes.

7. Strategic Implications

The events of 2026 strengthen the case for a broader definition of LPG supply security. Importers and market participants should increasingly evaluate resilience across the full delivery chain rather than focusing solely on benchmark price.

• Diversify supply origins and avoid excessive dependence on a single export corridor.
• Maintain sufficient storage and inventory buffers for critical end-use markets.
• Develop terminal flexibility across vessel sizes, product mixes and alternative origins.
• Build contractual optionality into origin, loading window, volume and logistics provisions.
• Integrate freight, vessel availability and terminal constraints into procurement decisions.
• Strengthen market intelligence so that geopolitical and physical-market signals are incorporated earlier into commercial decisions.

Outlook

The LPG market is likely to remain globally connected but structurally exposed. U.S. export growth provides an important balancing mechanism, yet the March 2026 shock shows that additional supply cannot instantly compensate for the loss of a major trade corridor.

For producers, importers, traders and governments, the emerging priority is resilience: diversified supply, stronger logistics networks, greater storage flexibility and commercial structures capable of adapting to rapidly changing conditions.

The key question for the next phase of global LPG trade is therefore not simply whether sufficient product exists. It is whether the market has sufficient flexibility to move that product reliably to where it is needed.

Sources & Data Notes

• International Energy Agency (IEA), “Energy crisis threatens world’s most vulnerable as cooking fuel shortages grow,” 2026. Used for Hormuz share, March 2026 export-flow disruption, clean-cooking exposure and India/Indonesia context.
• S. Energy Information Administration (EIA), Petroleum Supply Monthly / Propane Exports, annual data through 2025. Used for U.S. propane export series.
• S. Energy Information Administration (EIA), “Natural gas plant liquids exports reached record highs in 2025,” 30 March 2026. Used for NGPL and butane export context.
• Argus Media, “LPG Market Outlook: Impact of Iran War, March 2026.” Used as supplementary market context on physical availability and Asian market response.

Publication Note

This publication is prepared by Black Swan Global – Market Intelligence & Insights as general market commentary. It is intended to support discussion of international energy-market developments and does not constitute investment, financial, legal, trading or other professional advice. Data are drawn from publicly available sources considered reliable; Black Swan Global does not warrant that all information is complete or error-free. Market conditions can change rapidly.