Let’s take a look at a few charts. The first chart is our years over years flat price propane tracker in Conway and TET, comparing propane prices over the same trading day of the year for the past nine years.
You can see in Conway, which is on the left, that outside of the freak weather event we had in February, values would be at a 2021 high and likely a MULTI year high going back some ways. TET is definitely at multi-year highs right now, perhaps going back and challenging 1Q2014 levels. We have definitely exceeded the Sept/Oct of 2018 TET highs. The July monthly average in TET was $1.09 and some change. and the last time we had a monthly average that high in TET was April of 2014. So yeah, propane values are pretty, pretty strong right now.
Let’s look at two more charts. The chart on the left shows the rise in propane flat price at both hubs since its 2021 lows back on 4/21 and the chart on the right shows propane’s value relative to crude oil.
Relative to daily average prices, Conway has risen over $.4600/cpg in less than four months, with TET just over $.4000/cpg. Concerns over inventory levels along with a rise in WTI prices have fueled propane’s rise. WTI values have lost over 8% of their value from the 2021 high hit back on July 13th ($75.25) since then, but Conway propane has gained over 10% in value relative to crude with TET over 8%. This could tell us that propane’s fundamentals are in control of propane prices right now. I wouldn’t want to outright say that propane’s pricing has disconnected from crude oil just yet, because for one that would be impossible to confirm. But when you see WTI drop as it has over the past month and propane continues to hit new multi-year highs, it’s not the craziest suggestion in the world.
So what slows down the momentum of rising propane prices? Several things COULD do that, but the most clear answer, at least right now and to me, is rising propane prices. The cure for high prices is high prices, and at some point, if propane’s value to crude keeps pushing higher, the export trading arb could become so unfavorable that export cargoes get cancelled and the propane that was to leave the United States actually stays in the United States, which would bolster US inventories and ultimately lead to fewer inventory concerns. There are other factors to consider as well, but this is the most obvious one to me at this time.