That crazy little ethane molecule is at it again. Yesterday the price blasted to 67.875 c/gal, a level last seen on January 17, 2012. Petchem cracker margins are low. Production is up, but inventories are down. A big driver of the bedlam is the price of natural gas, trading in the $7-$9/MMBtu range for the past month. But as usual with ethane, there’s a lot more happening below the surface — including high domestic demand, growing export volumes, and significant developments in downstream petrochemical markets — all shaking things up. Looking ahead, uncertainty looms, with more export capacity, ever-changing ethane rejection economics, and uneven production growth. In today’s RBN blog, we’ll leap back into the ethane market to see what’s been going on, and where ethane is headed over the next few years.
It’s no secret that higher gasoline prices are a problem for a lot of folks, including everyday drivers, businesses and — maybe especially — the politicians who hear the complaints from the first two. Although prices at the pump have been trending higher for some time, they’ve really come to the forefront in the past several weeks following Russia’s invasion of Ukraine, which has stressed global energy markets and sent U.S. officials looking for any and all options to keep a lid on prices. In today’s RBN blog, we look at President Biden’s decision to allow the sale of E15 gasoline during the summer months, whether it’s likely to provide U.S. drivers significant relief from high prices this summer, and how global pressures are moving ethanol prices higher too.
It burns just like propane, smells just like propane, and gets transported just like propane. But instead of being extracted at gas processing plants or refineries, it is produced from renewable feedstocks like used cooking oil or soybean oil, and so it has a low carbon intensity. That means it is eligible for low-carbon fuel credits, like those available in California. Renewable propane has been around for years but has never gotten much traction due to a combination of technical and economic issues. Now that is changing, with a deal announced last week by a major propane retailer and a biorefiner showing the way to a win-win-win for the producer, the marketer, and the environment. In today’s RBN blog, we begin a deep-dive series on where renewable propane comes from, why it has been a challenge to get the market going, and what changes may create significant opportunities across the renewable propane value chain.
With Alberta’s bitumen production rising to record levels of late, finding more ways to export this molasses-like heavy oil has become more important than ever. In early 2020, Gibson Energy and US Development Group embarked on the construction of a diluent recovery unit in Hardisty, AB, to greatly reduce the need for diluent and retain more of it for reuse. With the unit’s commercial start-up at the end of 2021, another unique pathway for transporting Canadian bitumen to the U.S. Gulf Coast — and, possibly, overseas markets — has become a reality. In today’s RBN blog, we provide an update on this venture and discuss where it might lead next.
Way back in the spring of this year, propane prices were behaving themselves. Mont Belvieu values were high relative to the previous two years, but no higher than what they ought to be with crude oil up to the mid-$70s/bbl range, as it was back then. Yet, market players were uncomfortable. Production was flat, exports were strong, and inventories were not increasing fast enough to get balances where they needed to be by winter. At that point the market got nervous and started bidding the price of propane higher. When exports continued at high rates and it looked like $100/bbl crude was a real possibility, propane buyers went into a feeding frenzy, and by early October propane prices blasted to levels not seen in a decade. Then the market calmed down. Weekly inventory numbers from EIA started to look like they might be OK after all, exports backed off, and propane prices started to decline. That’s supposed to happen toward the end of heating season, not at the beginning. The frenzy soon turned into a rout in a counter-seasonal price move egged on by concern about the COVID-Omicron variant that saw propane collapsing by 35% over a five-week period. All that price action happened during the summer and fall, instead of during the winter, as it usually does. We just got ahead of ourselves. So, what happens next? That is what we will consider in today’s RBN blog, which is Part 2 of our Different Drum NGL blog series.
If there was ever a year that proves NGLs march to the beat of a different drummer, 2021 was it. Compared to pre-pandemic volumes, production is up, not down. It’s the same story for exports. Price behavior has been even more extraordinary. We’ve seen startling counter-seasonal price swings in propane and butane markets. Ethane has been dancing to the tune of volatile natural gas prices. The wackiness has even extended to natural gasoline, which this summer enjoyed seven weeks as the preferred feedstock for U.S. flexible steam crackers. Heck, it’s not even winter yet. And 2022 is likely to be every bit as chaotic. In today’s RBN blog, we begin a blog series discussing recent developments in NGL markets and take a look at what lies ahead.
It wasn’t that long ago that Western Canada was awash in propane, sending the vast surplus for export by railcar to the U.S. That has changed in the past two years as direct exports to Asia opened up and Canada’s domestic demand for propane rose. With supplies becoming tighter, the combined effect with increasing demand spells trouble for higher exports to the U.S. this winter, a time when they are desperately needed. In today’s RBN blog, we explore the current Western Canadian propane market and what might be next in store.
The high-demand season for propane is just around the corner: crop drying, then winter heating demand. This is when propane marketers make most of their money; so under normal circumstances it’s a happy time, when all participants across the supply chain are making last-minute preparations for the season of peak propane demand. But this year is different. There is palpable concern in the market about the level of inventories available to meet demand, and the possibility that propane could be in short supply. How could this be? As we have covered many times in the RBN blogosphere, U.S. propane production is more than double domestic demand. So how could a shortage possibly happen? The answer is pretty simple: exports. The U.S. exports more of its propane production than it uses here at home. This year the domestic market needs more barrels, so all that needs to happen is for U.S. prices to increase enough to shut off exports, right? Wrong. Propane prices have been spiraling up all year, and August prices are higher than they’ve been since 2013. But exports are still running strong, and so far, inventories are not building fast enough. In today’s blog, we’ll look at the drivers behind this seeming market aberration and consider why the upcoming winter season looks like uncharted territory for propane marketers.
Supplies of natural gas liquids, especially propane, have become increasingly tight in recent months, with prices reaching multi-year highs in the U.S. and Canada. Despite the strong price signals, increasing production is typically a lengthy, complex, and expensive process involving producers drilling new wells to yield more liquids-rich natural gas and crude oil. There is also another way to increase supplies: by extracting them from already processed and pipelined natural gas via a straddle plant that more intensively recovers additional NGLs, such as propane, from the existing gas supply. Canada’s Wolf Midstream has recently sanctioned such a plant, as well as a related pipeline and extraction plant in Alberta that it hopes to bring into service in 2023. In today’s blog, we examine this new straddle plant and Western Canada’s current propane supply situation.
The EIA report on propane inventories that came out yesterday was a shocker. This time of year, stocks are supposed to be building toward the levels needed to get U.S. propane markets through the winter season. But the numbers released on Wednesday showed an inventory decline, resulting in inventory balances now below the five-year minimum. The culprit, of course, is exports, with 1.4 MMb/d of them reported last week, a 17% gain over the year-to-date average. And these cargoes to overseas markets are happening even with propane prices in the stratosphere: more than double where they stood this time last year. Propane marketers were hoping that higher prices would slow down exports, but so far that is not happening. In today’s blog, we examine U.S. exports of LPG — propane plus butane — and discuss what may be ahead for these markets.
Fourth of July skyrockets were not the only fireworks earlier this week. The price of propane skyrocketed up to 112 c/gal before the holiday weekend and held at that level through Tuesday, an increase of about 21 c/gal or 23% over the past month alone. To put that in perspective, that’s the highest price for propane since April 2014, back when crude oil was over $100/bbl. Although propane came off a few cents on Wednesday in sympathy with falling crude prices, both Mont Belvieu and Conway propane prices are still almost 135% higher than this time last year. Assuming crude prices don’t fall off a cliff, how high could propane prices go? Hard to say. The propane market is experiencing unusually low inventories, relatively modest production growth, near record-high export volumes, and unconstrained dock capacity. Consequently, if we continue to see strong demand, but U.S. producers stay focused on capital discipline, thus constraining production, propane prices could be headed considerably higher this winter. Today, we continue our series of deep dives into the U.S. propane market and, in a blatant advertorial, describe how you can keep up with this rapidly moving market with RBN’s new Propane Billboard report and dataset.
Propane prices at Mont Belvieu soared above $1/gallon on Wednesday — the first time that’s happened in the month of June since 2014. This buck-and-change price doesn’t come as much of a surprise for industry insiders, however. U.S. propane inventories have been very skinny lately, sitting at 56.2 MMbbl — or only 587 Mbbl above the five-year minimum based on yesterday’s EIA data. At the same time, propane exports have been riding high, averaging 1.3 MMb/d so far this year, up nearly 90 Mb/d from the same time frame in 2020, while production has remained virtually flat over the past 18 months. Surprise or not, the spike past $1/gal raises an important question: How high will U.S. propane prices have to go before exports are reined in so U.S. inventories can increase? Today, we discuss the key drivers behind the current price level and our propane market outlook for the second half of the year.
So far in April, there was an unexpected run-up in propane prices early in the month, followed by a 21% swoon in the past 15 days of trading. The forward curve suggests smooth sailing from now through next winter season, but that seems unlikely, given recent market developments. Propane inventories, which are supposed to be building this time of year, actually fell last week, putting stocks at 16.9 MMbbl below this point in 2020, according to EIA statistics released last week. The data also showed that weekly exports spiked to the second-highest peak of all time at 1.7 MMb/d, while production declined two out of the past three weeks. And just over the horizon, there’s the potential for a big increase in Chinese propane demand as new petrochemical plant capacity comes online over the next three years. Today, we look at how these issues are likely to shape the propane market over the next few months and suggest that you consider attending our upcoming virtual conference, where we will pose these questions to industry leaders from production, midstream, exports, and retail market segments.
Wow, what a ride! That’s what came to mind yesterday as the 2020-21 propane season drew to its official end. But the excitement and uncertainty aren’t over, folks. Not by a long shot. Propane exports are still running sky-high; end-of-season inventories are at the low end, with a whopping 2-MMbbl withdrawal number in EIA’s stats yesterday; and a backwardated forward curve is not doing anything to encourage U.S. marketers and midstreamers to rebuild stocks. We get it — no one wants to think about next winter yet, just as spring is really springing. But still, you’ve got to wonder, could the dynamics that have been roiling the propane market be setting us up for skinny inventories and price spikes in the 2021-22 propane season? Today, we examine the challenges facing the propane market over the next few months.
It’s been over a month since the Deep Freeze swept across Texas, shutting down the power grid, curtailing natural gas supplies, and generally wreaking havoc on the state’s population and infrastructure. The petrochemical industry was hit particularly hard, with every ethylene-producing steam cracker in the state and many in nearby Louisiana forced into hard shutdowns — that is, production coming to a screeching halt with little or no preparation. The result was unit damage well beyond what typically happens with other weather-related events like hurricanes, where there is usually some ability to manage an orderly shutdown. Consequently, at least half of the industry’s capacity to produce ethylene and its by-products remains offline, a development that is ricocheting through supply chains across the economy. Today, we examine the magnitude of the damage, consider what is happening in ethylene markets — the epicenter of the turmoil — and contemplate the longer-term implications of the outages.