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Abu Dhabi National Oil Company (ADNOC) will start replacing some of the liquefied petroleum gas it supplies to India with cheaper U.S. cargoes from June, industry sources said, as U.S.-China tariffs rejig global trade flows.

The move will enable ADNOC to ship more of its own LPG to China, where buyers are paying higher premiums to replace U.S. supply after Beijing imposed steep tariffs on U.S. goods, and reduce LPG costs for India, the world's No. 2 importer.

India sources more than 80% of its LPG imports from the Middle East, including Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait, under annual contracts.

Earlier this month, Indian refiners made a rare request to Middle East suppliers to swap some of their term supply with U.S. LPG. Indian refiners asked for U.S. LPG to be delivered at discounts to the Middle Eastern benchmark Saudi Contract Price (CP), sources said.

ADNOC, through its trading units, has agreed to supply some U.S. LPG cargoes to India refiners under the annual contracts from June-July, said sources.

The U.S.-China war has widened the price gap between the Middle Eastern and U.S. LPG, they said.

However, one of the sources said: "It is difficult to replace the entire volumes with U.S. LPG."

June Goh, an analyst at Sparta Commodities, said: "Unlike China, India's consumption of LPG is mainly for domestic use and requires a higher percentage of butane in the blend."

"Thus India can benefit from the diversion of U.S. LPG cargoes but not the propane cargoes," she added.

Indian refiners - Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp - and ADNOC did not respond to Reuters' requests for comment.

India imported about 60% of its overall LPG consumption at 29.66 million metric tons in 2023/24, according to government data.

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