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DIGITAL EDITION
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THIS WEEK'S TOPIC:
PROPANE PRICE SPREAD
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Mont Belvieu-Conway propane price spread shrinks
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The premium Mont Belvieu propane carried over Conway propane this summer has shrunk considerably this fall.
Click to enlarge.
Conway propane was much lower than Mont Belvieu propane last winter. As the price chart above shows, both hubs saw prices increase throughout the summer, but, overall, Mont Belvieu prices outpaced Conway – especially during the months of August and September. Too much supply in the Midwest prevented Conway propane prices from keeping up with the rise in Mont Belvieu propane prices.
Both hubs saw prices plummet after Oct. 1 due to the collapse of crude prices. However, by that time, Conway finally received some demand help from crop drying and winter heating demand. As a result, the extreme gap in prices closed.
Click to enlarge.
The chart above shows the spread between Mont Belvieu and Conway prices. The spread values above zero indicate Mont Belvieu held the premium.
Conway traded at about a 20-cent discount to Mont Belvieu throughout much of the summer. The spread hit its highest point of 30.625 cents on Oct. 1. Currently, the 6- to 8-cent spread is approximately 2 to 4 cents more than what is typical for this time of year.
There also seemed to be a correlation between crude and the price spread. The spread was widening when crude was moving up, and was closing when crude was moving down. It appears Mont Belvieu propane moved higher with crude, while Conway did not. High Midwest propane production prevented Conway prices from fully participating in the summer price rally driven by crude.
The smallest spread between Mont Belvieu and Conway propane prices this year was .75 cents on Jan. 4, with Conway still lower than Mont Belvieu. In fact, Conway has not traded higher than Mont Belvieu since Dec. 5, 2014. The spread averaged 4.418 cents from 2015-17, and it averaged 4.518 cents last year. This year, it is averaging 16.01 cents.
It is very likely the higher-than-normal spread will appear again next summer unless logistical issues moving Midwest oversupply are resolved.
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WHAT IS COST MANAGEMENT SOLUTIONS?
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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
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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.
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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.
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Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.
We offer:
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Detailed market recommendations on hedge and pre-buy entry points
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Prompt market execution of hedging strategies
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Supply cost analysis and recommendation as to effective hedging strategies
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Large volume consideration when we place your hedges
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GOT STORY IDEAS? Email Brian Richesson, Editor in Chief
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