What in the world? The influence of US propane exports

Propane recently had an uptick in prices at both Mont Belvieu and Conway. As Chart 1 shows, propane prices had risen sharply due to both increased demand and supply disruptions during January’s winter storm. But after the impacts of the storm eased and temperatures moderated, propane prices went into a several-week downtrend. Then, suddenly, without any significant change in weather and the end of winter demand even nearer, a significant bounce in prices occurred. What in the world?

Chart 1 – Closing Propane Prices

At the same time propane prices were making their abrupt turn higher, U.S. propane inventories were also rising, as shown in Chart 2.


Why in the world would a sharp rise in propane prices occur at the same time a sharp rise in propane inventories was occurring? Shouldn’t propane prices fall when inventories are rising? Perhaps the word “world” is a clue.

There was a time when there would have been a direct correlation between inventories, seasonal demand and prices. But more and more, there is a disconnect between the season, inventory positions and pricing. Chart 3 helps us understand why.

Chart 2 – Total US Propane/Propylene Inventory

U.S. retail propane demand is now only 28 percent of total propane demand. A generation ago, retail propane demand was the market. During those times, there was a strong correlation between season, inventory position and pricing. Back then, the export category didn’t exist, and retail propane demand was about 70 percent of total demand. During that time, it was much easier for someone in the retail propane business to understand the correlation between demand and pricing. With exports now 62 percent of overall U.S. propane demand, it is in the position to influence the market the way retail demand used to impact pricing.

Chart 3 – Propane Demand

With this background, let’s go back to the recent rise in propane prices that went against traditional or conventional thinking. Keep reading...

Cost Management Solutions LLC (CMS) is a firm dedicated to the unbiased analysis of the energy markets for the propane industry.

Mark Rachal, Director of Research and Publications at CMS, regularly provides insightful looks into various facets of the marketplace.