India's liquefied petroleum gas (LPG) imports have been hurt the most by the closing of the Strait of Hormuz and uncertainty over the return of vessel trade, which can only be partially replaced by cargoes from the United States.
However, this would result in additional time and logistical costs, which will be exacerbated by the fact that the Indian rupee is presently trading at its lowest level versus the US dollar.
West Asia accounts for 85-90 percent of India's LPG imports, with the majority of cargo passing via the world's most critical energy chokepoint, which is 34 kilometers long. The scenario is also contributing to increased LPG prices, which may further reduce the profitability of oil marketing companies (OMCs) due to higher under-recoveries.Analysts and officials say Washington can help deliver replacement cargoes, but only partially.
In a March 3 commentary, Anna Zhminko, Vortexa's Associate Market Analyst, stated that the Middle East Gulf (MEG), excluding Iran, is India's top supplier of LPG, accounting for 92% (approximately 720,000 barrels per day) of the country's imports by 2025.
Drewry, a marine consultancy, stated on March 2 that it expects no loadings in the Middle East for the next week due to vessels diverting away from the Strait. In the short term (1 month), it expects exports from the United States to Asia to improve, somewhat compensating for losses in the Middle East.It also predicts an increase in global LPG costs. Nearly 40% of world LPG supply goes via the 34 km narrow channel each year, directly affecting importers such as India and China, which rely significantly on Middle East LPG supplies.
"We anticipate that very large gas carriers (VLGCs) now near the Strait will be idled or relocated to safer locations. Sustained blockade of the route will force vessels to redeploy to the United States, where new terminal infrastructure and substantial natural gas liquids (NGL) production may sustain increased exports," it added.
The ballasting of vessels will result in a short-term reduction in vessel availability, causing rate volatility.Drewry anticipates vessel availability to increase in the US Gulf, which, along with the ongoing Hormuz blockade, will constrain cargo availability and reduce pricing.
India relies on regular LPG deliveries because the country lacks strategic stocks for critical cooking fuel. Approximately 90% of LPG is consumed in houses for cooking. India has around 33.08 crore active domestic consumers, including approximately 10.51 crore beneficiaries of the PM Ujjwala Yojana (PMUY).
"Should MEG supply issues occur on a larger scale, India would certainly be the first destination to seek rapid replacement barrels. Such replacement is anticipated to come from the United States, notably the Gulf Coast (USGC), where LPG shipments reached a historical high of 2.34 million barrels (mb) in January," Zhminko remarked.

PADD 3 propane supplies remain at seasonal highs this year, with roughly 20 million barrels above last year's levels as of late February (EIA), she added.
According to a senior government official, even Washington does not want high energy prices with the US midterm elections taking place this year. President Donald Trump is particularly eager to keep domestic gasoline costs low.