LP, Natgas Run Higher as Demand Outruns Supply

December 5, 2013 04:54 AM


Propane prices have moved dramatically higher and the current condition of both natural gas and propane stocks suggest limited downside potential for LP near-term. Hours of Service Waivers had been issued in eight Northern Plains states to allow delivery drivers to spend more time on the road amid high demand. Most of those waivers have since expired, but will remain in effect for North Dakota until December 6, and Wisconsin until December 15.

A late season demand push log-jammed supplies as much of the incoming crop was run through the dryer after harvest. Delivery trucks were quickly shuffled around the Midwest to keep deliveries moving to the farm, but the onset of cold weather now puts LP for dryer fuel in direct competition with propane for home heat.

prstussCurrent national propane stocks are 18.23 million barrels behind the same time last year and well below the bottom end of the five-year average. Meanwhile, U.S. natural gas stocks have fallen as well sending the January 14 contract above four dollars today, marking a 44 1/4 cent reversal from November 5's open at $3.52. EIA reports a 162 Bcf decline in stocks on hand this week, leaving the national supply 5.2 percent below year-ago and 2.8 percent below the five-year average.

Retail propane prices reported to your Inputs Monitor have been on the rise since July, now 30 cents above year-ago pricing at a Midwest average of $1.74. Given strong on-farm demand, low national stocks and a weather forecast that will have the Central United States in the deep freeze for the foreseeable future, prices for both LP and natural gas are likely to remain high. 

 Propane stocks chart credit: EIA



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