The Iran war has scrambled the economics of energy values at the Gulf Coast loading dock. The value of a barrel of crude or propane, or the value of a cubic foot of gas can change materially in the short distance between the tank onshore and the ship offshore—and the size of that change now differs dramatically across commodities.

First consider propane. The price of propane in Mont Belvieu, TX was 85.5 c/gal on Friday, while the price in Asia (FEI) was 170.9 c/gal. Thus, the differential was 85.4 c/gal. It cost 32.7 c/gal to get there on a ship, leaving a margin of 52.7 c/gal. No wonder spot terminaling rates for propane at the Gulf Coast have soared from 7.5 c/gal at the first of February to 45 c/gal on Friday. See the graphic below to put the differentials on a percentage basis, so we can compare propane to other commodities. The value of propane increased by 1.6X by crossing the dock (blue bar=170.9-32.7)/85.5), then up to 2.0X (orange bar=170.7/85.5) when delivered in Asia. 

We need to make a few adjustments to look at crude in the same way. Cushing domestic sweet (WTI) settled at $99.64/bbl on Friday, with a $3.74/bbl differential to the Gulf Coast, implying $103.38/bbl at the Gulf Coast. Assume a $1/bbl cost at the dock, the crude would get to the water at $104.38/bbl. Brent settled at $112.57/bbl, suggesting a margin of $8.19/bbl when delivered to that market. But shipping cost from the U.S. Gulf Coast was up at least $10/bbl to $17/bbl. So measured this way and using the $10/bbl assumption, the value across the dock for crude is negative $0.81/bbl (112.57-10=102.57-103.38= (-0.81)). The value is only 9% higher when Gulf Coast WTI is delivered as North Sea Brent.  

Natural gas has the wildest price relationship across the dock. On Friday the price at the Henry Hub settled at $3.10/MMbtu. The price of gas in Asia was $20.40/MMbtu (JKM), while in Europe (TTF) it was $17.37/MMbtu, or 6.6X and 5.6X, respectfully. OPIS reports that a Gulf Coast LNG cargo on the water was going for $14.64/MMBtu (31–45-day window), suggesting that just getting across the dock was worth $11.55/MMbtu, or 4.7X. 

So, getting across the dock on Friday was worth 1.6X for propane, slightly negative for crude, and 4.7X for gas. Now that’s wild!