Tariffs Throw Prompt Mont Belvieu Propane Into Turmoil

Starting on April 10, China will enact an 84% reciprocal tariff on imports of U.S. goods. This increase was in response to the 104% tariff that the U.S. placed on imports of Chinese goods, which was subsequently raised to 125% by President Trump on April 9. China is likely to retaliate further. Unlike China’s February retaliatory tariffs of 10%-15% on U.S. oil and LNG, this time NGLs and all energy products are included. These higher tariffs have the potential to destroy propane and ethane exports from the U.S. In today’s RBN blog, we look at the potential impact of China’s reciprocal tariffs on the propane and ethane markets.

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.

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.