Propane News: Lowest Propane Prices of the Year!
n an extraordinary and rather sudden turn of events, Belvieu propane prices have tumbled nearly $.20 per gallon since August 31.
In fact, the last time that propane prices were lower than they are now was June, 2023, (12 months ago) and November, 2020 (46 months ago). I think we were still all wearing face masks then!
What’s Happening with Propane Prices?
Weak demand-side fundamentals have once again replaced geopolitical concerns, and WTI crude prices have fallen to the lowest level ($65.63) in several years. Last week was the biggest weekly drop in 11 months.
Propane prices nearly always take their directional cue from crude, so it’s no surprise that Belvieu propane prices have also fallen to new yearly lows ($.57125).
What is surprising is the unusually wide gap between September and October for Belvieu prices, as well as the topsy-turvy way in which the Conway/Belvieu spread has flip-flopped nearly $.06 per gallon this month, with Midwest pricing now at a premium to the Gulf Coast instead of a discount.
The current situation is likely a “best of bad choices” anomaly that should unwind itself within the next three weeks.
Bucking the Trend.
Interestingly, though, while Belvieu prices have followed crude lower, Teppco pipeline values for spot gas are now commanding a premium over term values!
Why? Well, propane’s value to crude has been trading as low as 37% (historically low) and that has contributed to robust export demand at Marcus Hook. Strong export demand has increased the need for in-line quantities of prompt propane.
Like a line of dominoes, stronger spot values on the pipeline are spilling over to the rail terminals (still playing catch-up from the pause in car movements that always occurs around rail strikes), refineries, and gas plants from the Ohio Valley to the East Coast.
It’s unusual to see spot prices higher than term differentials in late summer but it goes to show the unpredictable nature of market forces, especially on a regional level.
Propane Prices in Perspective.
To put current Belvieu propane prices into perspective, we’ve assembled a chart that goes back eight years and highlights the lowest and highest average monthly price and the spread between them:
This chart shows that the estimated monthly price of Belvieu propane for September is near the average of the lowest months every year since 2017. That should be good for your customers and good for your receivables.
Housekeeping Item.
In terms of housekeeping, if you still have uncovered fixed-price sales to your retail customers, you should consider covering them sooner than later. After all, prices are as low as they’ve been all year. Who knows what tomorrow will bring?
The Skinny
Every day we read or watch the news, and it seems like there’s always an explanation for why the price of crude oil is moving higher or lower. There are boxes labeled “geopolitics” or “supply & demand fundamentals” or “financial news” that the explanations fit into. This is supposed to help us determine market direction. But at its core, the essence of each explanation is either old news or conjecture.
The fact is that propane prices are currently as low as they’ve been all year. But that’s on paper. It’s only meaningful to you if you call us, schedule your loads, or cover your uncovered prebuys, and take advantage of what exists today.
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