Gulf Coast propane prices continued to hold a premium over Midcontinent product Wednesday as the market stabilizes into its traditional price relationship.
Propane at Mont Belvieu, Texas, was assessed at $1.555/gal on Wednesday while Conway, Kansas, propane was marked at $1.48/gal.
Both markets were significantly lower as warmer weather reduced heating demand in much of the country and as delays in loading LPG in the Houston Ship Channel back product into the domestic market.
The 7.5-cent premium the Gulf Coast carried over the Midwest was the highest since early May, Platts data showed.
The Mont Belvieu premium over Conway propane averaged 2.7 ceents last year, but reversed course and fell to a discount during most of 2014 so far as tight stocks in the Midcontinent led to a supply shortfall.
The Conway propane premium over Mont Belvieu reached an all-time high of $3.43/gal on January 23 when Conway propane hit a record high of $4.95/gal.
But, the US propane market reacted by sending lower value Gulf Coast product to the higher priced Midcontinent market via truck and rail.
In addition, propane was redirected to Conway from Hobbs, New Mexico, on the MAPL pipeline. Enterprise owns the MAPL pipeline and a 75,000 b/d fractionator at Hobbs that can send NGLs to either the Gulf Coast or Midcontinent.
Market sources have cautioned that Conway propane prices could again switch to a premium over Mont Belvieu given the current Midcontinent stock level and falling storage levels.
Midcontinent propane stocks were at 8.97 million barrels in the week ending February 7, data released by the Energy Information Administration showed last week. The record low for Midcontinent propane stocks is 5.4 million barrels, which was set during the reporting week of March 14, 2003.
The Midcontinent has seen average storage draws of 950,000 barrels per week over the past 10 weeks, EIA data showed.
Therefore, given that propane stocks enter a shoulder season roughly six weeks from now, the Midcontinent market could be headed for a record-low stock number this early spring.
Propane stock levels are weather driven and another sustained cold snap would be an important catalyst for record-low stocks in the Midcontinent.
The EIA will relaease its weekly propane stocks report on Thursday.