(Updates prices in paragraphs 1-6; Changes headline; Adds
detail about 2013 inventories in same period)
By Robert Gibbons
Jan 23 Spot propane prices in the U.S. Midwest
jumped more than $1 to a record near $5 a gallon on Thursday,
traders and brokers said, as frigid temperatures spur demand for
the heating fuel in a region where supplies already were tight.
Propane prices for January delivery at the Conway, Kansas,
trading and storage hub reached $4.93 a gallon on Thursday, up
from $3.39 on Wednesday, and more than double the price from
last Friday, when propane traded at around $1.75 a gallon.
After nearing $5 a gallon, spot prices on Thursday fell back
to $4.50 a gallon later in the day, trading sources said.
Prices at the Kansas hub for immediate supply, known as "wet
barrels," reached $4.95 a gallon, trading sources said, after
they surged to $3.59 a gallon on Wednesday.
Wet barrels were traded at $4.52 a gallon later on Thursday,
after the earlier surge.
The average residential propane price in the Midwest region
was $2.54 a gallon in the week up to Jan. 20, rising from $2.39
in the previous period. That was the highest since the U.S.
Energy Information Administration (EIA) began tracking prices in
Thursday's price at the Kansas hub was the highest in
Reuters data tracking prices back to April 1989.
At the key Gulf Coast hub at Mont Belvieu, Texas, spot
propane prices for January delivery reached $1.61 a gallon on
Thursday, up 8 cents from the peak trade seen the previous day.
Prices received more support, traders said, from data
showing U.S. propane inventories fell 3.4 million barrels to
35.3 million barrels in the week to Jan. 17. Inventories in the
same period in 2013 stood at 60 million barrels.
Data released on Thursday by the EIA showed propane stocks
in the Midwest dropped 1.3 million barrels to 10.2 million
barrels last week.
That left Midwest stockpiles 46 percent lower than the
comparable week in 2013, when stocks stood at 18.9 million
barrels, according to EIA data.
In a report on Thursday, the EIA pointed to increased demand
for drying crops at harvest in November and the demand boosts
from the cold weather as factors causing the price jumps.
A late corn harvest last year and cold, wet weather
requiring more supply to be used for crop drying helped drain
supplies in the region.
The EIA also cited logistical problems, including
maintenance on the Cochin Pipeline bringing supply from Canada
and rail transport disruptions, helping to curtail propane
deliveries to the region.
Since the week ending Oct. 11, propane inventories have
fallen by 12.8 million barrels in the Midwest, the EIA said,
compared with an average drop of 7.3 million barrels during that
period over the previous five years.
The spread between Midwest and Texas Gulf Coast prices has
spurred Midwest dealers to send drivers to pick up supply in
"Long lines have formed at Mont Belvieu," said a
Houston-based broker. "Lots of out of state trucks showing up."
While the cold snap in the Midwest is expected to ease over
the weekend, another cold front is expected to push temperatures
back into ranges that are severely below normal, according to
the Commodity Weather Group.
Exports of propane have also surged and contributed to the
drop in U.S. inventories. In a report last week, the EIA pointed
to global prices for propane that are significantly higher than
U.S. prices and said that propane supplies will continue to be
moved to the Texas hub for export.
U.S. propane exports surged to 408,000 barrels per day (bpd)
in October, according to the EIA, its most recent monthly data
The EIA's monthly export data available back to 1973 showed
the October export level was a record high. The EIA data showed
U.S. propane exports first reaching the 200,000-bpd level in
November 2012 and never exceeding 300,000 bpd until May 2013.
(Reporting by Robert Gibbons in New York; Editing by Grant
McCool and Amanda Kwan)