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Propane Prices Are Likely to Fall Further in Coming Months Amid Rising Inventories

The current market prices for propane in Texas, Mont Belvieu distribution hub dipped lower than the USD 1.1-per-gallon mark, which is below 30 percent compared to the price peak in March 2022 in the middle of skyrocketing domestic inventories and added pressure in the market from dropping crude oil prices.

On the other hand, propane exports from the US kept increasing because of robust demand worldwide, specifically from Europe, in the midst of an energy supply shift as a result of Ukraine's invasion by Russia.

Nevertheless, the overall view is that the extremely seasonal propane industry will relish the upward impetus while the inventories begin to exhaust in order to fulfil demand in winter.

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According to forecasts by analysts and Trading Economics global macro models, the expected trade rate of propane during the quarter end will be at USD 1.12 per GAL. The anticipated estimations for trade price are at USD 1.23 per GAL in twelve months.

It can be noted that last year the prices were beyond the five-year average. The domestic propane demand was positively affected by the COVID-19 pandemic. Amidst the global pandemic, schools, industrial plants, and commercial facilities were shut down.

All these institutions employ natural gas over propane for their operations, due to which the use of propane rose during lockdown restrictions leading to higher consumption of the commodity. Currently, as the economy has begun to recover, it could affect propane demand. The increased prices for the commodity could also affect the demand.

Gas Prices are Lowering

The average price of regular unleaded has been dropping nationally after reaching its peak earlier this summer at higher than USD 5 per gallon. The national price dipped lower than USD 4 on average a week before and is now at a price point of USD 3.92 per gallon.

However, this is not the best news for drivers as gas prices are still higher by 70 cents per gallon compared to a year ago. Still, this is a relief, and it is anticipated that the prices will lower further.

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Amidst all this, the prices of crude oil, which further determine gas prices, are also declining as an economic recession is anticipated by the investors meaning lowered oil demand in the approaching months. If the situation continues, the average gas price will dip to USD 3.50 per gallon nationally before the end of the year.

The demand for the commodity is divided between domestic and export, of which the domestic demand can be segmented into retail and petrochemical demand.

As per Procurement Resource, the prices of propane are declining due to the factors including rising domestic inventories along with additional market pressure because of dropping crude oil prices. At present, because the economy has begun to recover now, it may impact the demand for propane This increased prices for the commodity could in turn affect the demand in the upcoming months.


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