Mid-Month to Mid-Month: Lower Prices Coming?

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The energy markets this week were focused on the lifting of sanctions on Iran following a deal being struck over its nuclear program. An end to sanctions revived the specter of adding to the persistent global crude oil glut, further depressing already low prices. Analysts reported there was a possibility of up to 1 MMbbld of additional oil quickly flooding the markets, an amount Iranian officials said the nation could deliver within months. U.S. benchmark West Texas Intermediate crude headed lower on NYMEX July 15, falling 77 cents to $52.23/bbl. International benchmark Brent crude lost 86 cents and dropped to $57.65/bbl on London’s ICE Futures exchange. Absent sanctions, Iran will be free to export to any market willing to buy. Meanwhile, U.S. producers remain hamstrung by a 1970s-era export ban. With propane trading at about 33% the value of crude at Mont Belvieu and just over 26% at Conway, Kan., additional erosion of crude prices means more negative price pressure on propane.

Mont Belvieu average propane posted prices in mid-June were just under 50 cents at 49.500 cents/gal. A week later the average shed 2.625 cents to stand at 46.875 cents, but the month ended a bit higher at 47.438 cents. The July opening saw prices stronger, up nearly 3 cents to 50.313 cents. The following week they dropped 2.75 cents to 47.563 cents, and this week they are up to 49.188 cents/gal.

Propane at Conway, Kan. over the period held about a 10.5- to 12.5-cent discount to Mont Belvieu, with the mid-June average at 38.645 cents/gal. The following week prices were down more than 4 cents to 34.333 cents, followed by a near-3-cent jump to 39.770 cents as July arrived. The next week the average was down more than 4 cents to 35.583 cents. This week the average has climbed to 37.270 cents/gal.

The Mont Belvieu spot market was at 38.125-38.375 cents/gal. in mid-June before giving up almost 4 cents a week later to fall to 34.25-34.625 cents. As June wound down spots recovered to 35.75-36.75 cents, then as July rolled up they hardened to 38.25-38.875 cents. The following week spots moved higher to 39.75-41.125 cents, and this week they are little changed at 39.50-40.50 cents/gal.

Spots in the Group followed a similar path, but saw no gains the second week of July. Prices in mid-June were at 33.375-34.000 cents/gal., followed by a drop to 30.625-31.75 cents a week later. The end-of-month bid and offer firmed to 33.00-34.00 cents, but July’s arrival wiped out the improvement and spots dipped to 32.75-34.125 cents. This week they are up a bit to 33.50-35.00 cents/gal.

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