During my first near decade wholesaling propane, I always looked at the Conway and Mt Belvieu markets as sisters….jealous sisters. Being the father of two girls (11 & 4) this makes more sense to me now.
If one sister gets something, the other wants it and vice versa. As it relates to those two supply hubs, one of them didn’t get too far away from the other one on price without the jealous sibling trying to catch up; if Belvieu’s price rose, Conway would typically come running behind and vice versa. The opportunity to make greater profits by moving barrels to the region with the higher prices was often seized upon.
For the last month or so, there has been the real expectation that Conway was going to begin trading at a premium to Belvieu, or at least that the Conway demand combined with the TEPPCO allocation and potential moderate weather in the Southeast could cause barrels to begin flowing north. I wrote weeks ago that I felt we’d see $1.50/Conway propane this winter (when prices were in the mid $1.30’s) and here we are today less than a nickel away from $1.50 in Conway. I now feel very strongly we’ll see $1.60 at a minimum if not higher, possibly quite a bit higher.
The one factor that could have been a deterrent was the jealous sister effect. However, based on data I have read today, I just don’t think that will be the case in this brave new world where the United States has the cheapest propane in the world and is exporting it by the cargo load..literally.
There is roughly an 11ct to 13ct Conway premium to Belvieu, right now. But propane is not going to be flowing north (where it is badly needed, by the way). Why?
Near the Thanksgiving timeframe, there was strong word that a large producer sold a spot cargo at Belvieu +60ct. This same report said that a current spot cargo is Belvieu +30ct. So if the current Conway over Belvieu spread is 13ct, we still have a long way to go on that spread before spot barrels are diverted to Conway and not overseas where they are fetching much better netbacks.
If you have the ability to play the Conway/Belvieu spread, you might want to look into it. If you can take on more length in Conway, I think the evidence is overwhelming to do it, even at these prices. Availability will be the trick this winter.