US LPG prices touch 13-year record low
LPG prices at the Enterprise Products Partners (EPC) terminal in Mont Belvieu, Texas, dive to a 13-year low this week as traders speculated that heavy rainfall in the area caused brine contamination at the storage hub, disrupting storage operations.
Propane stored at the Mont Belvieu EPC terminal was traded for as low as 33.25 ¢/gal (US), the lowest price since February 2002. The price of EPC propane declined at a significantly quicker rate than over at the Lone Star NGL (LST) terminal, incresing the price difference between propane traded at either terminal from 2.125 ¢/gal to 5.50 ¢/gal on Wednesday morning. While the LST/EPC spread averaged 0.125 ¢/gal in April, had already begun to widen around mid-May, indicating increased inventory levels at the EPC terminal opening at 1.8 ¢/gal last Friday morning, reaching the strongest level since 31 December 2014.
Propane from Enterprise, which stands stands at 33.25 ¢/gal, drastically loses against crude oil, only achieving 24.15% of the Nymex WTI crude futures contract. The last time LPG was last valued this low, this was due to an overall lower oil price and it reached 64.85% of the crude benchmark, 21.29 $/bl.
Market players feared that heavy rainfall has contaminated area brine ponds, diluting the brine and lowering the salt levels to such an extent which renders the brine unusable hampers storage operations. The National Weather Service warned of moderate flooding in Chambers county, Texas, this morning, particularly surrounding the Trinity river.
Enterprise’s terminal suffers more than Lone Star due to its higher capacity and higher capacity utilsation. US LPG inventories have also risen more than anticipated by more than 2.5 million barrels to over 71 million barrels, according to the US Energy Information Administration (EIA). The concerns of oversupply were worsened by the news, especially after openly voiced concerns that the EPC terminal was nearing its capacity.
Analysts would not be surprised, should refiners begin to burn the propane produced at their facilities as refinery fuel instead of natural gas, as this would make more sense from an economic point of vew.