US propane, butane prices break from WTI strength

OREANDA-NEWS. April 21, 2015. Propane and butane values at the two major US NGL hubs fell relative to the crude benchmark at the start of the week as seasonally lower demand sets in.

The value of propane traded in the LST terminal at the Gulf coast trading hub of Mont Belvieu, Texas, relative to US benchmark WTI stood at about 41.87pc by the early afternoon session, down from 42.99pc at last week's closing session.

At the same time, while WTI prices firmed, propane prices weakened. LST propane started the session purchased at 56.625?/USG and fell to 56?/USG, down from its 57.625?/USG midpoint on 17 April.

Propane outright values were able to break away from crude's direction as retailers have been drawing down their existing inventories. The lack of buying demand is finally catching up to the market that has blindly followed strength in crude futures despite a regional oversupply.

Last week propane values firmed with crude futures despite bearish news that the US Energy Information Administration reported stocks rose by a larger-than-expected 2.058mn bl during the week ended 10 April.

The end of April typically marks when propane prices begin to soften as propane's peak heating demand diminishes. During the end of April last year and into May, propane prices averaged 104.61?/USG.

In the midcontinent, Conway, Kansas, propane firmed early, but price gains lagged behind WTI. The market was priced at 36.7pc of WTI at midday as cash prices stood at 49.75?/USG. On Friday the market closed at 50.25?/USG, or at 37.8pc of WTI.

Butane at Mont Belvieu stood at 49.94pc of WTI today, down from an average 50.95pc on Friday. Prices were weaker today; oscillating within a traded range of 66.875-67.625?/USG, down from the 17 April traded range of 67.25-68?/USG.

Conway butane was valued at 44.67pc of WTI at midday Monday, down from 45.5pc on Friday, though the commodity's price was stronger session-on-session at 60.5?/USG.

Similar to propane, butane's peak demand season for gasoline blending ends in March, subsequently diminishing demand for the heavy NGL.

During the low demand spring and summer months, Mont Belvieu butane and propane become more competitive against each other and ethane to become most economical feedstock for petrochemical cracking.

At Conway, demand for propane and butane is stagnant. Much of the trading interest is being generated by the widening midcontinent/Gulf coast price spread, as participants move product south for cracking and export.

Butane cracking margins are currently the most competitive, at 21.61?/lb, with ethane a close second, at 21.47?/lb. Propane is in third place as a feedstock, at 20.63?/lb.

Mont Belvieu ethane prices have firmed today, from 16.875?/USG at the market's open to 17.25?/USG, moving contrary to declines seen in the natural gas market. During the same time, ethane has managed to hold a premium to its fuel value, standing at 0.52? premium at midafternoon.