|
|
|
DIGITAL EDITION
|
|
|
|
THIS WEEK'S TOPIC:
PROPANE VALUE
|
|
Propane's relative value to crude drops below expectations
|
Propane’s relative value to crude has been dropping recently, falling well below the five-year average. A combination of weakening propane fundamentals and a rally in crude are responsible.
Mont Belvieu propane is now at 41 percent of West Texas Intermediate (WTI) crude, well below the five-year average for this time of year.
Conway’s relative value is even worse at 35 percent, putting it just a percentage point above its five-year low. On average over the last five years, Mont Belvieu has been 48 percent and Conway 46 percent of WTI crude at this point in the year.
Frankly, back in April we did not foresee propane’s relative value dropping as far as it has over this summer. We expected a slowdown in the rate of growth in propane supply and a dramatic increase in propane export capacity to prevent the kind of lows we're currently experiencing. However, propane exports have been more price sensitive or price elastic than we could have foreseen then.
(continued below)
Propane is a good value for a buyer – at least for August propane – at these relative values. Essentially, a Btu provided by propane is on sale. However, that sale right now is not as good for the winter months. For example, January 2017 Mont Belvieu is trading at 45 percent of WTI crude. Conway is trading at 44 percent of WTI crude, a whopping 9 percentage points over the August barrel.
Obviously, the market is pricing that propane fundamentals will improve, causing its relative price to crude to improve in the coming months.
Currently, inventories are very high in the Midwest. This is causing storage problems that are leading to beat-up Conway prices. But some traders say product that had been staying in the Midwest this year is set for export off the East Coast starting in 2017. That could quickly alleviate the stress in Midwest storage and elevate prices.
|
|
|
|
CONNECT
|
|
|
|
|
|
|
WHAT IS COST MANAGEMENT SOLUTIONS?
|
|
|
|
|
The Propane Price Insider is an email service that provides:
- Three daily price Flash Wires
- Periodic option quotes
- Wednesday inventory data updates around 11 a.m. ET
-
Evening report with executive summary, weather maps and complete review of energy prices that are based on propane's Btu equivalent
For a free 10-day trial subscription by email, sign up online here or call 888-441-3338.
|
Cost Management Solutions LLC (CMS) is a firm dedicated to the analysis of the energy markets for the propane marketplace. Since we are not a supplier of propane, you can be assured our focus is to provide an unbiased analysis.
Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.
|
Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.
We offer:
-
Detailed market recommendations on hedge and pre-buy entry points
-
Prompt market execution of hedging strategies
-
Supply cost analysis and recommendation as to effective hedging strategies
-
Large volume consideration when we place your hedges
|
|
|
GOT STORY IDEAS? Email Brian Richesson, Editor in Chief
LOOKING FOR ADVERTISING OPPORTUNITIES? Email Brian Kanaba, Publisher
|
|
|
|
