Oct 1, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin

Midwest Propane Prices Push Record as Pipelines Can’t Catch Up

January 23, 2014

Propane in the Midwest advanced to records as a cold front increased demand for heating with inventories below normal levels and pipelines constrained by service changes.

This week’s weather front is colder than the government forecast, Tancred Lidderdale, an U.S. Energy Information Administration analyst in Washington, said by e-mail yesterday. It follows a larger-than-normal draw on supplies that was used to dry a late-season, wet crop of corn.

Propane in Conway, Kan., ranged from $2.87 to $3.57 a gallon Wednesday, according to data compiled by Bloomberg. The spot price Tuesday was 96.62 cents more than at Mont Belvieu, Texas, the largest premium since at least 2001. Last year, propane at Conway sold at an average discount of 2.8 cents to Mont Belvieu. They are the top two U.S. propane storage hubs.

"We are trying to find incremental supply and we are almost at rock bottom for inventories at Conway," Peter Fasullo, a principal at EnVantage Inc., a Houston-based energy consultant, said by phone. "Conway is basically saying bring every barrel up there, we will pay a premium for it."

Midwest stockpiles of propane are the lowest for this time of year since the government began keeping records in 1993, curbing supply in a region that uses more of the fuel to heat homes than anywhere else in the U.S. The Midwest accounts for 36 percent of propane for home heating, followed by the South at 34 percent, EIA data show.


Pipeline Capacity


Supplies were reduced because 300 million gallons of propane was used to dry crop harvests in the Midwest last year, far above the 65 million gallons used in 2012, said Jeff Petrash, a vice president of the National Propane Gas Association, a trade group based in Washington.

"There was a record grain harvest in the Midwest this year, it came later than normal, it came during a rainy time so that the grain was wet," Petrash said. "That came later in the season and tended to draw down inventories in the Midwest below where they would normally be."

Propane also rose as pipeline space fell after operators made changes to delivery systems. Kinder Morgan Inc.’s Cochin pipeline, which carries hydrocarbon gas liquids to the Midwest, was shut for maintenance from late November to Dec. 20.

Enterprise Products Partners LP reversed a 16-inch pipeline, the smaller of two lines on its TE Products Pipeline system, to carry ethane south as part of the ATEX system. Ethane, butane and propane are all natural gas liquids that can be shipped by pipeline. NGLs, which are pumped from wells along with natural gas and separated at fractionation plants, are used as feedstock in petrochemical plants, as diluent for heavy crude in pipelines and as blending agents in gasoline.

Previous 1 2 Next

See Comments


Log In or Sign Up to comment

COMMENTS (2 Comments)

PullMyFinger - Chappell, NE
Let's have the USDA start giving their crock reports on energy supplies - that will knock the price down immediately. The theme could be "high prices are the cure for high prices - and it's not just for grains anymore".
11:34 AM Jan 25th
smartin56 - Manchester, IA
Limited supply, limited pipeline capacity. 56 days to spring!

3:38 PM Jan 23rd



Receive the latest news, information and commentary customized for you. Sign up to receive the AgWeb Daily eNewsletter today!.

Enter Zip Code below to view live local results:
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions