Propane prices down to multi-year lows

June 11, 2019 By    

May was a bearish month for propane. Falling crude and sluggish fundamentals combined to send propane prices down to multi-year lows. Mont Belvieu LST opened the month with a daily average of 62 cents. By May 31, the daily average was 49.75 cents, down 12.25 cents, or 19.76 percent, over the course of the month.

Image: Cost Management Solutions

Image: Cost Management Solutions

Conway opened the month with a daily average of 54.1875 cents and closed with a daily average of 47.625 cents. The drop was 6.5625 cents, or 12.11 percent.

Image: Cost Management Solutions

propane prices down Image: Cost Management Solutions

Mont Belvieu LST posted a monthly average of 57.6875 cents and had an average value of 39.79 percent of WTI crude. In April, the monthly average was 64.2024 cents, 42.22 percent of WTI.

Conway’s monthly average was 51.6307 cents with a 35.64 percent relative value to WTI crude. In April, the monthly average was 55.7560 cents, and the relative value to WTI averaged 36.67 percent.

For the month, WTI crude traded at an average of $60.8650 per barrel, compared to $63.8710 per barrel in April.

It looks like the weakness in May has opened the door to an upswing in June. Propane prices finally reached a point this past week where retailers were willing to step in to cover winter barrels as they saw the downside risk manageable at current prices.

Crude also made a 22 percent downward correction from April 23 to June 5. Traders are looking for reasons to buy crude. Investors started moving back into riskier assets such as equities and commodities last week, after the Federal Reserve signaled it would be willing to lower interest rates this year, essentially putting up a backstop for the market. The Organization of the Petroleum Exporting Countries is also signaling that it will likely keep production quotas in place past their current expiration on June 30.

These could be enough reasons to have crude rally and pull propane prices higher. The oversupply situation in propane remains and is likely to be around for a while, but it looks like we could be in for a firmer market, at least in the short term.

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