propane storage

Exactly the same product. Exactly the same day. In storage very nearby. Yet their prices diverged by 17 cents per gallon — a spread equivalent to $7 per barrel. That’s a very substantial difference for prices that typically are almost indistinguishable, differing by an average of only 0.3% in recent years. The disparity roiled the financial underpinnings of exports for over a month and busted numerous inventory hedges. Is this some rare commodity? Hardly. It’s Mont Belvieu propane, the Rock of Gibraltar benchmark propane price in the U.S., and to a great extent around the world. But during October there was a crack in that rock a mile wide. 

Exactly the same product. Exactly the same day. In storage very nearby. Yet their prices diverged by 17 cents per gallon — a spread equivalent to $7 per barrel. That’s a very substantial difference for prices that typically are almost indistinguishable, differing by an average of only 0.3% in recent years. The disparity roiled the financial underpinnings of exports for over a month and busted numerous inventory hedges. Is this some rare commodity? Hardly. It’s Mont Belvieu propane, the Rock of Gibraltar benchmark propane price in the U.S., and to a great extent around the world. But during October there was a crack in that rock a mile wide. 

For a few days in late July, the price differential between propane stored at Enterprise Products Partners’ salt caverns in Mont Belvieu, TX, and propane stored at facilities owned by others a few hundred yards away quickly widened to as much as 10 cents/gallon. That’s by far the biggest spread of its type we can recall, and while we can’t say for certain what caused the “Enterprise-vs.-others” propane differential to blow out, there’s a likely — and familiar — culprit: NGL infrastructure constraints. Something else this unusual pricing event confirmed is that, no matter where the NGL storage, fractionation or pipeline constraint may occur, it almost always has an outsized effect on the much smaller NGL storage and fractionation hub in Conway, KS. What’s with that? Today, we look at the recent, rapid slide in propane prices at Enterprise’s Mont Belvieu storage facility and discuss what it tells us.