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Midwest Propane Falls From Record as Companies Rush Supplies

Jan. 24 (Bloomberg) -- Propane in the U.S. Midwest eased off a record high as Enterprise Products Partners LP and others hustled to move supply into the area.

Prices on the spot market in Conway, Kansas, fell 88 cents a gallon to $4.02 at 3:29 p.m., according to data compiled by Bloomberg. Propane at the Mid America Pipeline Co. terminal in Conway ranged from $4.12 to $4.71 a gallon today, DTN Energy said.

Enterprise shifted its next scheduled propane batch on the TE Products pipeline to an earlier position in the next pumping cycle to deliver supplies to the Midwest and Northeast sooner, the company said in a bulletin to shippers yesterday. The batch will leave the Gulf Coast on Jan. 26.

“There are a lot of suppliers that are doing as much as they can to bring supplies up there,” said Peter Fasullo, a principal at EnVantage Inc., an energy consulting firm in Houston. “It’s really hard to judge a market when it’s really distressed like this. It’s just risen so fast and so strong that it’s got to back down at some point.”

DCP Midstream Partners LP has brought two propane tankers into its Providence, Rhode Island, terminal since September and has three booked for February, Lisa Newkirk, a Denver-based spokeswoman for the company, said by e-mail yesterday. She said the company brought in one ship in 2013 before September.

Enterprise sent four tanker trucks loaded with propane in Mont Belvieu to the Midwest and Northeast, Rick Rainey, a Houston-based company spokesman, said by phone.

Turkey Farmers

U.S. Senator Chuck Grassley, an Iowa Republican, asked Federal Trade Commission Chairwoman Edith Ramirez in a letter to review the propane market in the Midwest after prices more than tripled from Jan. 14 to Jan. 23.

“I request that the Federal Trade Commission remain vigilant in overseeing the propane market to prevent possible anti-competitive behavior or illegal manipulation, and to ensure that any supply shortages are not created artificially,” Grassley wrote.

Propane suppliers are telling Minnesota turkey farmers, who use the fuel to heat their barns, that there there’s only enough fuel left to last five days, Steve Olson, director of the Minnesota Turkey Growers, said today. Suppliers are giving out partial loads to stretch out the inventory.

“Some of the suppliers are requiring guys to pay up front, and with the increase in price, it’s causing a huge economic impact on them,” Olson said. “The bigger concern is what’s going to happen when supplies run out. Because we’ve got to heat the birds, we’ve got to heat the barns.”

Falling Supplies

Supplies of propane and propylene in the Midwest fell by 1.34 million barrels to 10.2 million last week, the Energy Information Administration said yesterday. That’s the lowest level for mid-January since the EIA began keeping data in 1993. Propane supplies throughout the U.S. fell by 3.39 million barrels to 35.3 million, the lowest for this time of year since 2001.

Supply issues in the Midwest date to 2011 and 2012, when increased production from shale formations inundated Conway and sent prices to an average discount of 10.4 cents a gallon and 18.9 cents a gallon below prices in Mont Belvieu.

The spot price in Conway today was $2.51 more than at Mont Belvieu, down 87 cents from yesterday when it reached 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.

New Pipelines

Companies built pipelines such as the DCP-operated 175,000-barrel-a-day Southern Hills system to allow producers to ship propane and other natural gas liquids to the Gulf Coast. Enterprise and Targa Resources Partners LP were among companies that last year opened docks on the Gulf Coast for NGL exports.

Midwest supplies were further depleted by higher demand for drying crops last fall, followed by severe winter weather in December and January. The Midwest accounts for 36 percent of propane used for home heating, followed by the South at 34 percent, EIA data show.

To contact the reporters on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net; Eliot Caroom in New York at ecaroom@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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