(Source: HartEnergy.com, Shutterstock)
Propane rose at Mont Belvieu, Texas, for the fifth week in a row, reaching its highest price since the end of May. However, the price relative to West Texas Intermediate (WTI) crude oil, 38.3%, is far below the five-year average for early November of 53%.
“The much lower valuation to WTI reflects the current overhang in propane stocks that has existed since the first quarter of this year,” said EnVantage Inc. in a recent report.
Digging deeper, the analysts discovered the source of the relationship difficulty: the Gulf Coast.
In the week ending Nov. 1, the U.S. Energy Information Administration (EIA) reported that the U.S. propane inventory totaled slightly over 100 million barrels after an increase of about 320,000 barrels in the previous week. That was a 15.64 million barrel, or 18.5% increase, over the total at the same time in 2018.
That compares to an increase in inventory of 15.44 million barrels of propane in PADD 3 (Petroleum Administration for Defense Districts) which is the Gulf Coast.
“That means that virtually all of the U.S. surplus of propane resides in storage facilities on the Gulf Coast and it is a major reason why Mont Belvieu propane prices are at a well-below-normal price relationship to WTI for this time of year,” said EnVantage.
Why so much down south? One word: Permian. Increased flows of NGL are flowing into the Gulf Coast as production keeps chugging along in the Permian Basin.
That’s not the case elsewhere. Propane inventories are down in the Midcontinent and in Wisconsin, supplies were critically tight due to the late corn harvest and cold weather.
The result can be seen on the NGL price table. The spread between the price of propane at Mont Belvieu, 51.25 cents per gallon (gal), and Conway, Kan., 49.03 cents/gal, is only 2.22 cents. Just three months ago, the spread was 6.2 cents/gal. A year ago, the difference was 14.4 cents/gal.
NGL prices in general trended upward in the last week. Mont Belvieu ethane was up 11.8% and Conway ethane rose to its highest level since April. Mont Belvieu butane hit a 27-week high and the Mont Belvieu hypothetical NGL barrel reached its highest point in 24 weeks.
In the week ended Nov. 1, storage of natural gas in the Lower 48 experienced an increase of 34 billion cubic feet (Bcf), the EIA reported. That compared to the Stratas Advisors expectation of a 49 Bcf build and the consensus expectation of 52 Bcf. The EIA figure resulted in a total of 3.729 trillion cubic feet (Tcf). That is 16.6% above the 3.199 Tcf figure at the same time in 2018 and 0.8% above the five-year average of 3.7 Tcf.
Recommended Reading
Midstream M&A Adjusts After E&Ps’ Rampant Permian Consolidation
2024-10-18 - Scott Brown, CEO of the Midland Basin’s Canes Midstream, said he believes the Permian Basin still has plenty of runway for growth and development.
Post Oak-backed Quantent Closes Haynesville Deal in North Louisiana
2024-09-09 - Quantent Energy Partners’ initial Haynesville Shale acquisition comes as Post Oak Energy Capital closes an equity commitment for the E&P.
Analyst: Is Jerry Jones Making a Run to Take Comstock Private?
2024-09-20 - After buying more than 13.4 million Comstock shares in August, analysts wonder if Dallas Cowboys owner Jerry Jones might split the tackles and run downhill toward a go-private buyout of the Haynesville Shale gas producer.
Aethon, Murphy Refinance Debt as Fed Slashes Interest Rates
2024-09-20 - The E&Ps expect to issue new notes toward redeeming a combined $1.6 billion of existing debt, while the debt-pricing guide—the Fed funds rate—was cut on Sept. 18 from 5.5% to 5%.
Dividends Declared Sept.16 through Sept. 26
2024-09-27 - Here is a compilation of dividends declared from select upstream, midstream and service and supply companies.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.