Agfax Buzz:
    June 12, 2014

    Propane, Oil Prices Could Be Affected by Iraq Instability – DTN

    AgFax.Com - Your Online Ag News Source

    By Brian Milne, DTN Energy Editor

    Spot propane prices at the Conway supply hub in Kansas are hovering on either side of $1 per gallon so far in June, the lowest they have been since September 2013, and well below the $4.95 per gallon all-time high registered in late January. The fact they are 20 cents higher than a year ago might have some would-be buyers waiting on the sidelines for a further decline.

    However, attacks on major Iraqi cities in recent days mean an expected decline from current values might be a few weeks away. In fact, spot propane prices are set to increase amid an upside breakout by New York Mercantile Exchange crude oil futures. NYMEX crude futures spiked more than $2 per barrel on Thursday to a $106.53 per barrel nine-month high on the spot continuation chart on news Islamists have taken control of two important cities in Iraq and were advancing on Baghdad, threatening to choke off the country’s oil exports.

    The widening civil war in Iraq has quickly changed the geopolitical risk premium in oil prices, with increasing production from the OPEC member earlier in the year capping the upside in global oil costs. Iraq production at 3.1 million barrels per day (bpd) was seen climbing to 4.0 million bpd. Now, however, Islamists have taken control of large swathes of the country’s oil infrastructure and could threaten key ports for exporting oil in southern Iraq.

    These events create huge uncertainty for the near-term direction for crude prices, with the NYMEX crude contract having sway over spot propane values. Further deterioration in Iraq would push crude prices even higher, targeting the 2013 high of $112.24 per barrel reached in August. Should Iraq slow the attack, we could see the crude contract leak lower, likely pressuring propane prices.

    Just this week the Minnesota Corn Growers renewed its concern of potential propane shortages this fall and urged growers to top their tanks this summer.

    One urgent reason is the critical Cochin pipeline — which stretches from Alberta to Ontario in Canada and North Dakota, Minnesota, Iowa, Illinois, Indiana, Ohio and the corner of Michigan in the U.S. — is being converted from propane shipments to Canadian tar sands oil in July. It had supplied 36% of Minnesota’s propane, but rail cars will now have to make up the difference. That could require an additional 4,000 railcar shipments after the Cochin pipeline switch, Minnesota Corn said. It has asked the Minnesota Public Utilities Commission to temporarily waive its rules and speed permits for large propane storage units which could ease supply bottlenecks next fall and winter.

    Historically, early summer is the time for buyers to secure the best price for purchasing propane, with demand for the fuel highest during the winter months. The buying season has frequently run through mid-August. However, watch your buying window, which will likely be shorter this summer than in years past.

    Domestic propane production is averaging nearly 16% higher than a year ago, suggesting prices should decline. However, propane exports are up more than 40%, finding a new home for the extra barrels, with exports ramping up sharply in the third quarter 2013 following new export capacity along the Houston Ship Channel to move the supply overseas.

    The export trend has legs, and there is more capacity expected to move into service over the coming months. Combined with a resurgent U.S. petrochemical industry, increasing propane production has ready markets to absorb the off take.

    So, if you’re sitting on tank bottoms, pay close attention to the market over the next few weeks because propane prices might very well be plumbing their 2014 lows.

    Tags: , , , , ,

    Copyright DTN. All rights reserved. Disclaimer.
    Powered By DTN

    Leave a Reply

    Name and Email Address are required fields. Your email will not be published or shared with third parties.

    Sunbelt Ag News

      Grain TV: Increased Soybean Demand Rallies Market07-28

      Doane Cotton Close: Rebounds from Oversold Conditions07-28

      DTN Livestock Close: Feeder Futures Explode to New Record Price Levels07-28

      AFB Grain-Soybean Close: Wheat Unable to Follow Corn, Soybeans Higher07-28

      AFB Cotton Close: Moves Higher in Narrow Range07-28

      AFB Rice Close: Futures Down Slightly07-28

      Crop Progress: Corn, Soybean Conditions Decline, Still at Historical Highs – DTN07-28

      DTN Cotton Close: Higher on Suspected Weekend Business07-28

      DTN Grain Close: Soybeans Rally on Dry Forecast, Exports07-28

      DDGs: China Issues New Import Rules, U.S. Unlikely to Comply – DTN07-28

      Cattle: Minimizing the Risk of Scours — DTN07-28

      Good on Grain: Storing the 2014 Corn Crop07-28

      DTN Livestock Midday: Futures Pull Back from Early Highs07-28

      DTN Grain Midday: Soybeans and Corn Up, Wheat Lags07-28

      DTN Fertilizer Outlook: Domestic Ammonia Prices Down Slightly07-28

      DTN Cotton Open: Trades Modestly Ahead07-28

      Flint on Crops: Challenges for Farmers Keep Coming, Keep Changing07-28

      DTN Livestock Open: Cattle Complex Staged for Bullish Start07-28

      DTN Grain Open: Soybeans Start 10 Cents Higher07-28

      Keith Good: July 1 Cattle, Calf Inventory Comes in at Historic Low07-28

      USDA Commentary: Weekly Cotton Markets, Weather by Region07-25

      Rose on Cotton: No Pleasure in this Market Made for Bears07-25

      Rice Market: U.S. Futures Decline as Global Prices Rise07-25

      Rice Crop: Harvest Begins Slowly in Louisiana and Texas07-25

      Rice Commentary – Rice Farmers Need to Consider a New Business Plan07-25