Canadian NGLs fall on summer pricing switch

OREANDA-NEWS. March 20, 2015. Canadian NGL prices fell this week as marketsswitch to summer seasonal prices from winter.

Propane and butane term contracts in Canada usually contain two seasonal pricing clauses, one for winter when heating fuel consumption increases and another for summer when demand thins to a trickle. Term contracts anchor the market and spot prices adjust accordingly.

Similarly for butane, prices rise during the colder months because more of the product is blended into the gasoline pool. Come summer, propane and butane are mostly sold into storage, though field-grade butane in Western Canada continues to enjoy demand as a component in isooctane.

The shift take place on 1 April and 1 September, but spot markets trend ahead due to variable time frames for delivery.

This year's price shift is expected to be more dramatic than prior years, market participants told Argus. This was underscored by the Canadian National Energy Board's (NEB) 12 March data on February LPG inventories, which showed underground propane inventories at 7.15mn bl, six times greater than the year prior, and butane at 3.19mnbl, up 26pc year-on-year.