Conway Propane Price Blowout

Good morning,

I hope this message finds you well.  President Trump was impeached a second time this week and the markets didn’t seem to flinch.  WTI crude prices continue to hold on to gains with renewed hopes that demand will continue to improve going through the year.  IEA kept their forecast for daily crude consumption unchanged which was actually support to current prices.  Now that WTI is holding above the psychological $50/barrel, I believe that more headwinds will need to appear in order to push prices back below $50/barrel.  One of the main supports to higher prices is the potential for another $1.9 trillion dollar coronavirus relief bill proposed by President Elect Joe Biden.  The continued devaluation of the dollar will support crude price futures that are held against the US Dollar.  The US will be in a tricky situation as the economy tries to fully reopen with increased energy costs.  If the new $1.9 trillion dollar package passes we will be in a very tight balancing act.

In local news, gasoline and diesel prices continue to hold.  Retail gasoline prices are above $2/gallon and retail diesel prices are hovering near $2.50/gallon.  I do not expect to see any relief on pump prices in the coming weeks.

Propane is the story of the week.  Due to continued increased demand from China who is having a record cold winter, the US continues to produce record amounts of propane and export at record rates.  Months ago, we were looking at the largest glut of propane supply in history.  Now, inventories have fallen below the five year average and we are still in January.  Speculation and unregulated runs on Conway/Belvieu are somewhat to blame as base prices and indexes have increased over 50 cents/gal since the beginning of September.  This is over a 70% increase in cost of propane in six weeks!  To put this in perspective, that would be retail gasoline going from $2/gallon to $2.85/gallon in six weeks!  If that happened, the news would be talking.  But propane trading and exports continue to go unnoticed and unregulated.  We are allowing suppliers to export our national supply to China and the US consumer is footing the bill.  Suppliers are winning on both fronts.  I have been saying for years, propane is a need based commodity during six months of the year.  The propane export business is new within the last ten years.  Nothing has been done to protect our national supply from being fully exported and leaving the US with supply shortages and record price increases.  I am hoping that we see a price decline to start the first week in February.  If not, propane prices could get ugly.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

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