We started off this propane season worried about the threat to U.S. propane markets from big-time exports. With exports now exceeding total U.S. propane demand, how would propane markets respond if we ever got a really cold winter? Well, now we know. Frigid weather finally arrived in February with a vengeance. But the propane market handled it pretty well. Now, as we approach the end of propane winter and examine where the market stands with inventories, prices, and especially exports, the big question is, what happens next? Will production volumes replace depleted stocks now sitting near a five-year low, or will those barrels move overseas? Will strong global petchem demand pull supplies out of U.S. markets? And if so, what does that imply for the 2021-22 retail propane season here in the U.S. In today’s blog, we’ll begin an exploration of these issues and introduce our upcoming RBN virtual conference covering developments in the propane market scheduled for May 12. Warning! Some of today’s blog is an unabashed advertorial for the conference.
We’ve had a series covering U.S. propane markets going all this winter, starting with Now You See It, where we warned of the possibility of a coming propane price squeeze due to the unprecedented level of exports. We kept the focus on propane supply and exports in Big Panama With A Purple Hat Band and It's All Over Now, where we looked at how frigid weather in Asia had pulled even more U.S. propane into export markets. And then, with Deep Freeze weather looming in February, we considered what might happen in Cold As Ice, and then what did happen in Looks Like We Made It.
Now, with only three weeks left in propane winter (which officially ends on March 31), where are we? As shown in the left graph in Figure 1, the brief price spike in the Conway market has dissipated, down from 141 c/gal coming out of the Deep Freeze on February 24 to 87 c/gal on Monday, according to IHS OPIS. That puts Conway about 7 c/gal under Mont Belvieu, which is still holding up at 94 c/gal, only 6 c/gal off the February peak in that market. Blame the high Mont Belvieu price on exports. Even though exports were down during the Deep Freeze, cargoes are loading again, with 22 VLGCs (the large propane ships) moving out of the Gulf Coast over the past ten days.
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