Warm Winter, Early Spring Reduced Last Winter's U.S. Propane Prices

---

Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--The El Niño-fueled warm winter of 2023-24 in North America led to less demand for propane as a heating fuel, which led to slightly lower prices during that time, according to the U.S. Energy Information Agency (EIA). And because of an early planting season in 2023, less propane was used by Midwestern farming operations that often use copious amount of the fuel to dry crops before storing or shipping. The early spring allowed crops to mature early, letting them dry naturally before being shipped to market.

U.S. propane's benchmark price is set at Mont Belvieu, Texas. During the 2023-24 winter heating season, those prices averaged $0.77 per gallon, $0.03 less than during the previous season, and much lower than 2021-22's $1.25 average, the EIA reports.

About half the six million U.S. homes that use propane for space heating are in the Midwest and Northeast, and warm temperatures there led to reduced demand, except for a short arctic blast in January, 2024.

Retail Break for Consumers
Lower wholesale prices carried downstream to the retail markets, said the EIA, across the three regions for which it tracks those numbers: the East Coast (PADD1, Midwest (PADD2) and Gulf Coast (PADD3).

East Coast prices averaged 1% lower than the previous year, Midwest prices hovered at levels around 10% lower, and the Gulf Coast began the year down by 10% and finished a bit higher, at 7% lower. All three regions saw a price/demand rise during the January cold front.

Reduced Demand Balanced by Rising Exports
Domestic usage may have been on the slide, but exports are up due to a couple of key international factors. In December of 2023, the EIA noted, the U.S. set a record for propane exports at 1.9 million barrels per day. In fact, the U.S. exports more propane than it uses domestically.

Industrial Info's Geoffrey S. Lakings noted that propane exports are spurred by the fact that international prices are significantly higher than domestic ones. "Gas producers like Antero, Range, and others have announced that they are moving forward with production because of continued international demand for these liquids. China's petrochemical industry is a significant destination for U.S. exports."

Indeed, 2024 export numbers are significantly higher than the year before, said LPGas Magazine. Through the week ending April 14, propane exports averaged 1.585 million barrels per day (BBL/d), 384,000 BBL/d higher than the same period of 2023.

The EIA noted that China and East Asian chemical feedstock demand centers around propylene as a base chemical in the manufacture of polypropylene. Polypropylene fiber is used for car interiors, packaging and personal protective equipment.

One reason for U.S. propane's East Asian market growth is Saudi Arabia's voluntary crude oil production reductions. The EIA reported that exports from that country to Asia fell by 22% from the first half of last year to the second half.

That made room for U.S. outflows to grow by 6% during that same period, and by 25% overall in 2023 compared with 2022. This amounted to a 190,000-BBL/d rise. The undersupply of Saudi propane also caused the price differential there to rise compared to Mont Belvieu, further propelling U.S.-Asian trade, as noted by Lakings.

Propane to Europe
Russia's invasion of Ukraine led the EU to switch from Russian oil and gas supplies as a whole, relying on the U.S. for their supply. The EIA said, "The 12th package of EU sanctions on Russia in December 2023 included a ban on LPG [liquefied petroleum gas] from Russia." LPG includes propane and butane.

Storage Remains High
Even with exports continuing to grow, so is the U.S. inventory, most of which is stored near Mount Belvieu, now clocking in at 5-year highs for this season. Summer is usually the time when inventories build for propane, much as they do for natural gas. Any significant further rise in inventory could push propane prices lower. Since natural gas liquids (NGLs) are a byproduct of natural gas and oil formations, its output cannot be controlled separately. How prices go this summer remains to be seen.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).