Examining the major propane price shift in April

Propane prices saw a significant change in April.

The chart above plots the Mont Belvieu propane price at the LST pricing point for the month of April. The daily average (average of high trade and low trade) on the first trading day of the month was 77.5 cents. That daily average on the last day of April was 93.75 cents, which was a 16.25-cent, or 20.97 percent, increase.

The chart below is for Conway, showing a similar pricing trend, though at a lower price level.

Conway opened the month with a daily average of 61.625 cents and closed with a daily average of 78.5625 cents. That was a 16.9375-cent, or 27.48 percent, increase.

Fortunately for propane retailers who were more likely interested in buying propane for next winter than for April, the price increase was not nearly as severe.

Mont Belvieu LST was averaging around 76.5 cents for the Oct. 18-March 19 period on the first day of April. Buyers could obtain coverage for that same winter strip at around 83 cents at the end of the month. That was a less dramatic 6.5-cent, or 8.5 percent, gain over the course of April.

Conway winter strips were around 72.25 cents at the beginning of April and were around 79 cents at the end of that month. That was a 6.75-cent, or 9 percent, gain.

After May became the front month for propane, prices dropped sharply. Mont Belvieu LST propane closed at 96 cents and Conway closed at 78 cents on the last day of April. As of May 4, May Mont Belvieu LST was down to 87 cents and May Conway was down to 71.5 cents.

However, the Oct. 18-March 19 winter strip was still pricing at 82 cents for Mont Belvieu LST and 79 cents for Conway. On April 30, that winter strip was the same price. Winter propane prices lagged the sharp upward movement in April, and they are lagging the retreat of May propane prices.

Below is a forward price curve that we provide to our daily subscribers.

Click to enlarge.

While the movement in May propane prices is getting all of the attention, most propane retailers are more concerned with the price of propane in the future. This price curve is very dynamic and constantly changing, but it gives propane retailers an idea of what propane is trading for in the months they are interested in buying. What is going on with front-month propane (currently May) isn’t always transferring down the price curve, as the analysis at the beginning of this Trader’s Corner proved.

The prices in the forward price curve are indicative of where the market is trading. However, the actual price paid would likely be slightly different, given constant market movement.

As propane retailers buy for the winter months, they should take caution not to get caught up in the headline propane price, which is usually the current or prompt month. It is important for retailers to look specifically at the price of propane for the months they would like to have price protection.

Call Cost Management Solutions today for more information about how Client Services can enhance your business at (888) 441-3338 or drop us an email at info@propanecost.com.