June 22 (Bloomberg) -- Saudi Aramco, the world's biggest producer of liquefied petroleum gas, may cut prices in July because of falling demand from Asian chemical makers including CPC Corp. and Mitsui Chemicals Inc., according to a Bloomberg News survey.

Saudi Aramco may lower prices of propane by 3.4 percent to $572 a metric ton from $592 by the end of June, according to the median of five estimates by traders who declined to be identified because of company policies. The refiner may trim butane by 2.8 percent to $595 from $612 a ton, according to the survey. The company will announce prices by end-June.

LPG, burned in Asia as cooking and heating fuel, is also used by chemical makers to replace naphtha as a raw material for making ethylene, used in plastics. CPC and Mitsui Chemicals increased consumption of LPG after naphtha prices soared to a record on May 24. Since then, naphtha in Asia has fallen 7.5 percent on rising imports from Europe and India.

``LPG may fall because of lower demand by chemical makers after naphtha prices softened,'' said N. Ravivenkatesh, a Singapore-based analyst at Purvin & Gertz Inc. ``Unlike other refined products, LPG is primarily used by households for cooking. And residential demand in Asia's emerging economies is price sensitive.''

LPG has become a less attractive replacement for naphtha after the difference in prices narrowed, according to the traders in the survey.

China Imports

Naphtha's price premium to butane, the preferred substitute, has fallen 47 percent to $48 a ton on June 18 from $90.50 a month earlier. Naphtha for delivery to Japan closed at $674.50 a ton yesterday, according to Bloomberg data.

Propane imports into China, Asia's second-biggest LPG buyer, plunged 55 percent in May compared with January, while butane purchases slumped 46 percent, according to Beijing-based Customs General Administration. Japan is Asia's largest LPG importer.

LPG has become a less attractive replacement for naphtha after the difference in prices narrowed, according to the traders in the survey.

Saudi Aramco, based in Dhahran, Saudi Arabia, sells about 14 million tons of LPG annually under one-year contracts and through individual cargoes for immediate delivery.

The prices set monthly by Aramco reflect the company's view of market conditions including supply and demand, and prices of naphtha and crude oil, according to Ken Otto, a Houston-based senior vice president of Purvin & Gertz.

Propane prices may fall to between $565 and $575 a ton, according to the survey of traders' estimates. Butane prices may decline to between $580 and $600 a ton, the survey showed.

To contact the reporter on this story: Trisha Huang in Singapore at thuang14@bloomberg.net

Last Updated: June 22, 2007 06:50 EDT