Principal contributors: Josh Eiermann, Warren Wilczewski
Since mid-September 2020, wholesale propane prices at Mont Belvieu, Texas, the main U.S. hydrocarbon gas liquids (HGL) hub, increased to an average of $1.33 per gallon (gal) during the week ending September 24, 2021, the highest weekly average since February 2014. Wholesale propane prices have increased because of high international demand and low global propane supply. The United States exported an average of 1.3 million barrels per day (b/d) of propane in the first half of 2021, 100,000 b/d more than in the first half of 2020, despite relatively flat production and domestic consumption.
The U.S. propane market has tightened because of the increase in exports, and wholesale U.S. propane prices have risen in line with wholesale propane prices in overseas markets. U.S. exports of propane during the first half of 2021 accounted for 60% of total U.S. propane demand when we combine domestic consumption and exports, up from 58% in the first half of 2020. We forecast that net exports of HGLs from the United States will remain high through the end of the year and then gradually decline as OPEC+ crude oil production rises, resulting in increased global production of associated propane and other natural gas plant liquids.
The general imbalance between growing global propane demand and reduced global propane production has contributed to wholesale propane prices in Northwest Europe and East Asia that have more than doubled in the past year. Because Northwest Europe and East Asia are net importers of propane, which is used in both markets for domestic space heating and as a petrochemical feedstock, the supply and demand imbalance has driven up prices in both regions as importers aim to secure supplies.
Relatively high international prices and strong integration between the U.S. propane market and the global market through exports have resulted in U.S. wholesale propane prices rising alongside prices in major international markets.
U.S. imports of propane from Canada have also decreased this year because producers in Canada have developed new export outlets where propane can be exported from Canada directly to major importers in the Pacific Basin by tanker. Two new export terminals were completed in British Columbia on the west coast of Canada: the AltaGas Ridley Island Propane Export Terminal and the Pembina Prince Rupert Terminal, which together can export more than 70,000 b/d of propane overseas, rather than into the U.S. Midwest by rail.