OREANDA-NEWS. April 01, 2015.  The US north/south propane spread widened to its softest level in 12 weeks as seasonal midcontinent heating demand dampened amid warmer weather.

The differential between propane traded at Conway, Kansas, and Mont Belvieu, Texas, now pegs midcontinent supply at a 6?/USG discount relative to the Gulf coast, a low not seen since 6 January.

Argus assesses the Conway/Mont Belvieu propane spread based on spot trades done at both the Enterprise Products Partners (EPC) and Lone Star NGL (LST) terminals. Yesterday the Conway/EPC spread traded actively as traders closed out positions for the end of the month and quarter.

The spread emerged early yesterday afternoon to trade at -5.50?/USG, down 0.125?/USG from the prior day's assessment. The spread widened to -5.75?/USG later in the session.

Book squaring began at the end of last week as the Conway/EPC spread dropped 1.125?/USG during Friday's session. The drop moved the spread to -5.375?/USG, a low unreached since 3 February. The relationship held within a tight 0.50?/USG range throughout the prior 9 sessions, averaging -4.27?/USG.

In today's morning session, both the Conway/EPC and Conway/LST spreads were done at -6?/USG.

As the midcontinent transitions out of its peak annual demand season, which will officially end today, the spread is expected to widen further in coming weeks. Export and petrochemical demand should continue to hoist propane in the Gulf coast hub higher relative to the trading center in Conway.

Conway propane has traditionally held a discount relative to Mont Belvieu, but last year's winter demand shortage flipped the typical relationship. Conway's average premium against the Gulf coast spiked to a record-high of 324.875?/USG on 23 January 2014, but normalized quickly to average a 0.08?/USG discount against Mont Belvieu during March 2014, flipping from a premium to a discount on 14 March, right in the middle of last year's shoulder season.

Last year saw a resurgence of the Conway propane premium during summer months as a pre-buying trend emerged to prevent a second supply shortfall in the 2014-2015 winter season. While the market closes out a humdrum winter with limited prompt spot demand, the robust preparations seen during last year's off-season are unlikely to repeat, as the overhauling drop to petroleum commodity prices has made the spot market far more attractive to spot buyers.