US propane spot prices reach 18-month high as exports strip supply

By Bobbie Clark

HOUSTON (ICIS)–US spot propane spot prices reached an 18-month high early on Wednesday, as supply statistics showed propane consumption rose by 15.9% for the week ending 1 November, while inventories fell by 4.2%.

Prices were approaching $1.1950/gal (€3.3471/litre), sources said, as the US Energy Information Administration (EIA) said propane supplies fell to 62.1m bbl, while consumption spiked to 1.775m bbl/day.

Meanwhile, propane exports were steady at an all-time high of 249,000 bbl/day.

This is the fourth straight week inventories have declined. Consumption has risen by 41.3% since 11 October, according to EIA statistics.

Year on year, consumption has risen by 28.0%, while inventories are down by 15.6%.

Spot propane prices have reflected these fundamentals.

Since the week ending 27 September, spot prices have risen by 10.4%, going from $1.0625/gal to $1.1725/gal. That’s the highest price since the week ending 27 April 2012, when spot prices traded in a range of $1.1750-1.1775/gal.

Sources said exports have been the main driver behind this run-up in prices. There has been some uptick in crop-drying demand, one source said, but not very significant.

Much of that export activity comes from energy giant Enterprise Products Partners, which opened an expanded liquefied petroleum gas (LPG) export facility at the Houston Ship Channel in the spring.

The company has already announced plans to not only expand that facility, but also build a new one, bringing Enterprise’s total export capacity to 14m bbl/month.

Additionally, Phillps 66 has announced plans to develop its own LPG export site at Freeport, Texas, to be operational by mid-2016. The company said it will have a capacity of 4.4m bbl/month.

Sources said supplies cannot keep up with the current rate of consumption and exports.

However, production of propane is projected to increase over the next several years. There are also a number of pipeline projects in the works that will increase transportation between the US Gulf (USG) and other high-production regions in the US.

($1 = €0.74)