Rain pushes Mont Belvieu propane to 13-year low

OREANDA-NEWS. May 27, 2015. Propane prices at the Enterprise Products Partners (EPC) terminal in Mont Belvieu, Texas, plunged by 18.9pc to a 13-year low this morning as traders speculated that heavy rainfall in the area caused brine contamination at the storage hub.

Mont Belvieu propane stored at the EPC terminal changed hands at 33.25?/USG before midday, the lowest deal done since 27 February 2002. EPC price declines greatly outpaced drops at the Lone Star NGL (LST) terminal, moving the LST/EPC spread from 2.125?/USG on Friday to 5.50?/USG this morning. At 33.25?/USG, EPC propane stands at 24.15pc of the Nymex WTI crude futures contract. When propane's cash price was last valued this low, it stood at 64.85pc of the crude benchmark, which settled at \\$21.29/bl.

Propane traders with storage at the EPC terminal, which holds roughly 200mn bl of NGLs, told Argus that Enterprise did not provide operational updates to its lessors. But market players speculated that heavy rainfall has contaminated area brine ponds, which become inoperable when heavy rainfall saturates salt content. The EPC terminal is impacted more strongly than LST due to its larger size and higher inventories of propane.

US propane inventories rose by a larger than expected 2.538mn bl to 71.042mn bl for the week that ended 15 May, according to estimates published by the US Energy Information Administration.

The National Weather Service warned of moderate flooding in Chambers county, Texas, this morning, particularly surrounding the Trinity river.

Oversupply concerns were exacerbated this morning after talks that the EPC terminal was nearing its capacity brewed for weeks in prior trade sessions. The LST/EPC spread began to widen at mid-month, indicating higher inventory levels at the EPC terminal. The LST/EPC spread averaged 0.125?/USG in April, and firmed to 1.8?/USG on 22 May, the strongest level since 31 December 2014. The spread became skewed higher at December's end due to year-close book squaring.

Market players believe that at this level, refiners may begin burning the propane produced at their facilities as refinery fuel as it makes more economical sense than burning natural gas.

A 30-40pc chance of rainfall will last until the end of tonight in Chambers county, according to the National Weather Service. Continued rainfall could force propane prices lower at the EPC terminal.