US-based brokerage Poten & Partners expects LPG prices to stay high for the rest of the year thanks to high crude prices and a tight supply-demand balance.

Speaking on a webinar on Thursday, analysts Zahid Afzal and John McDonald said there were questions about US LPG supply growth in the coming years while Middle East exports increased. On the demand side, they said Chinese imports were driven by its petrochemical sector as demand jumped in South East Asia.

"The big question is how will production grow from here on and will exports continue to increase," Afzal said, referring to US production.

"In the past, exports had been higher in the second half of the year due to higher winter demand.

"We expect the second half of the year will see a flat export compared to the first half, because of slow production growth and the extremely low levels of inventory we are seeing right now."

Poten suggested that if US producers ramped up drilling quickly, LPG supply could hit 82m tonnes by the end of the year and eclipse 90m tonnes by 2023.

However, its base case for production was more muted, with output just peeking over 80m tonnes by the end of the year and topping out at approximately 87m tonnes by 2023.

On Monday, Cleaves analyst Joakim Hannisdahl said prices are high due to a small number of cargoes available for export and that higher volumes for the US are necessary to push up freight rates.

Then, Poten assessed VLGC rates at $14,000 per day, down from $50,000 per day in mid-May.

On Wednesday, the broker reported that rates had fallen further to $9,499 per day.

Afzal said there were indications that those higher volumes would be coming.

“The good news is that the price trend in LPG in the forward months, especially in 2022 is declining, which suggests that the market believes production will increase," he said.

"The spread between the US and Far East is also widening, which implies that rising demand in that region, especially from the petrochemical sector, will support a higher price, while higher production in the US [will support arbitrage]."