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Part 1 here.
Part 2:
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The U.S. propane market is in a unique position today. Production has continued to grow while domestic demand remains stagnant. The only solution for the market to balance is exports; however, those have been constrained by capacity at the dock. This combination of factors has left propane storage extremely high. In today’s RBN blog, the second in a two-part series, we continue our examination of the factors affecting the propane market and the expectations for storage dynamics through the end of the year.
In Part 1 of this blog series, we reviewed recent supply/demand dynamics of the U.S. propane industry. The three most important takeaways of that post were that (1) production continues to grow but is not expected to surge as a result of the war with Iran; (2) export levels are forecast to increase with the startup of Enterprise’s expansion of its EHT terminal on the Houston Ship Channel; and (3) storage levels are extremely high in today’s market. In Part 2, we will begin by examining export economics and how they are calculated. After that, we will wrap the story up with the outlook for 2026 storage levels.
Export economics are a key metric to watch because they help illustrate how strong the markets to Asia and Europe are. There are four key metrics influencing export economics, measured here as the arbitrage (or spread) between U.S. and Asian/European prices. The first is the cost of U.S. propane, the second is shipping costs, the third is the dock fee, and the fourth is the price of propane in Europe or Asia. In today’s analysis, the focus will be on economics with Asia.
Figure 1. Non-TET Mont Belvieu Propane Price. Source: OPIS