LST propane at Mont Belvieu, Texas, fell last week to the lowest price relative to crude in more than 14 months, as an over-supplied market continues to weigh on values.
Prompt-month LST propane was valued at 42.9pc of Nymex WTI crude on 14 January, the lowest since 29 October 2024. Propane prices rebounded to 43.8pc of WTI by 20 January, but remained below the average 54.1pc five-year average for January, a difference likely mitigated by relatively low crude prices.
US propane inventories settled at 95.7mn bl in the week ended 9 January, 33pc above the five-year average for that time of year, according to US Energy Information Administration (EIA) data. In the US Gulf coast region, propane stocks were 60pc above the five-year average at 62.6mn bl.
US propane stocks ended the heating season in March at an average of 44.9mn bl during the past five years. To reach that level, US stocks would need to drop on average by about 4.62mn bl each week through the end of March. US propane inventories have posted declines of that size or greater in only 3.2pc of weekly EIA reports dating to January 2015, including a record 9mn bl draw in the week ended 22 December 2023.
Propane export economics have largely recovered from the cancellation-levels of mid-to-late 2025, and US loading capacity has grown with Energy Transfer's 250,000 b/d propane and ethane flex expansion at its Nederland, Texas, terminal coming online in July and ramping up afterwards.
Still, US propane supplies are set to build further relative to seasonal norms. To keep stocks from building more than 33pc above their five-year average, net exports and US consumption would have to consistently eclipse production by at least 467,000 b/d. EIA in its January Short-Term Energy Outlook forecast propane production from natural gas processing and refineries would average 2.63mn b/d and domestic consumption would average 1.12mn b/d in the first quarter. If those forecasts prove correct, net exports, or exports less imports from Canada, would need to average 1.98mn b/d through March to maintain a 467,000 b/d overhang, which would top the 1.82mn b/d record set in November 2024.
Even a surge in winter heating demand may provide only limited relief to bloated propane inventories. If domestic consumption in the first quarter averages the record 1.48mn b/d seen during a January 2025 cold snap, keeping inventories no more than 33pc above the five-year average would still require net exports of 1.61mn b/d, just below the 1.67mn b/d recorded in the first quarter of 2025.
Further inventory growth relative to historical levels may cause propane values to drop further relative to WTI by the start of summer, with some market participants suggesting the ratio could fall my as much as 13 percentage points to near 30pc, the lowest since 2020.
