March 10, 2017 - As we slide into March there seems to be one topic that continues to come up at family get-togethers, basketball games, and around the office; the crazy warm weather. Anyone that has been outside or watched the local weather report knows that we have seen some of the warmest February temperatures in almost three decades. This weather is fantastic for early yard work, looking for deer antlers, and getting a few steaks on the grill. Being in the propane business this weather conversation usually leads into a discussion of how little propane my family, neighbors, and friends needed this winter and an assumption that propane prices should have been cheap all winter long.
This is not what we saw most of this winter, unlike last year, we saw larger demand in the Mt. Belvieu market. When this happens, we see Midwest propane barrels purchased to relieve commitments by traders and producers, allowing production barrels to be shipped to the Gulf Coast to capture the increased value in the export market. This continued growth in the export market created larger than expected draws from both markets during January and February. It also pushed the premium for Gulf propane barrels from 3 to 10 cents over the Midwest values.
Larger draws and the premium in the Gulf Coast market created a steady climb in the Midwest flat price through the beginning of February. The market has begun to realize the bulk of the Midwest demand is over and pricing has started to come back in line with our traditional Spring/Summer pricing structure. We will continue to keep our eyes on the growing export infrastructure, demand and the ever so popular propane build season, as it will be the first indication of the long term pricing structure for the 2017/2018 propane season.
Kyle Fecht serves as the GROWMARK
Propane Supply Manager. He can be reached at email@example.com.