On June 1st, Mont Belvieu propane non-TET fell to 70 cnts/gal from about 150 cnts/gal six months earlier, down more than 50%. See Graph #1 below. But over the past couple of weeks the propane price has rebounded. On Friday the OPIS propane number was up to 89.4. Have we hit bottom for the time being? What makes propane prices move the way they do in the first place? Today we’ll continue last Friday’s blog series that covered trading and pricing of natural gasoline, normal butane and isobutane with a deep dive into the same issues for the most famous of the NGLs – propane.
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Today’s topic: Supply up again but demand heading into potentially cooler August
Recapping the Heavies
On Friday we covered y-grade and the heavies. Y-grade is the mixed NGL stream that is produced at natural gas processing plants. Most of it moves by pipelines to one of the major fractionation centers – like Conway, KS or Mont Belvieu, TX – to be split into purity products – ethane, propane, normal butane, isobutane and natural gasoline. These purity products also go by their hydrocarbon molecule shorthand, C2, C3, NC4, IC4 and C5.
The market price for each of the three ‘heavy’ NGL products tends to move with crude oil and motor gasoline prices. That is because one of the largest end uses for all three products is the motor gasoline market – either directly or indirectly. Each of the heavy products also has other markets, including petrochemical, refrigeration, denaturant and diluent. These products also share one other feature in common at Mont Belvieu. Each has quality variations that result in significant price differentials depending on whether the product comes from a TET or a non-TET source. For more on all of this, go back and read Part I.
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