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In the May 21 issue of Trader’s Corner, we showed the following chart depicting Mont Belvieu LST closing prices to that point in May.
We followed the chart with this statement:
“Prices were weaker during the first week of the month, falling to a low of 85.6875 cents. Since May 8, propane prices have been in a strong upward trend. Propane prices began to slip on May 18 — they were down about 2 cents from May 17. That raises the potential for a propane price pattern to develop, like March, where prices were mostly neutral in the second half of the month and dipped at the end of the month.”
The chart below shows the pricing pattern for March that we referred to in the statement.
Below is a chart with the remainder of May closing prices.
Obviously, the pricing pattern for March and May turned out to be very similar.
The pricing pattern for April was a little different than March and May. What was similar, however, was the initial weakness to start April followed by a strong second week. After mid-month March and May, prices were more bearish, while April showed strength through the end of the month. The difference could have been a rally going on in crude during the second half of April.
While there is absolutely no guarantee pricing patterns will repeat, they can be useful for propane retailers. The reason we wrote the May 21 issue of Trader's Corner was because of the strong run May 8-17 that had a lot of folks asking if they should be buying. We pointed out the recent trends and decided to see if May had the end-of-month lull that occurred in March.
(continued below)
Since it did, the next question would be, is it possible for propane prices in June to open weaker like the last three months? While we think it is worth seeing if propane is weaker in the first week of this month, we must point out a significant difference in the transition from May to June than was present in the last few monthly transitions.
The price spread between May and June at the end of May was practically non-existent. The price of May and June was essentially even as May closed. In previous months, the expiring month generally held a fairly significant price premium compared with the upcoming month. That could mean we will see less downward price pressure during the first week of June than we saw in March, April and May.
Because June opened slightly lower than where May closed, we suggest holding on buys to see if that continues. However, don’t forget how strong prices have been in the second week of the month. That is especially true for any product you need to buy for June. The recent price trend suggests our best opportunity will come in the first seven days of this month.
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