How Does Crude Oil Price Effect Propane Prices?
Crude oil prices have been in the news more in the last few weeks than ever before. While you have been hearing that Crude oil Prices even went negative one day. Meaning they would actually pay you to take the product. How does this effect Propane prices?
Propane is a by product of natural gas & crude oil production. Propane is also a by-product of the refining process. The price of propane is related to both of these and also supply and demand.
Right now demand is actually fairly stout as the northeast has had a sustained cold spring and demand from the Petroleum Chemical market is China is ramping back up.
On the flip side the demand for Crude oil and natural gas has crashed during COVID 19. The fact there is no demand for gasoline and industrial demand has led the oil complex to crash. Since the prices are so low the producers do not have an incentive to keep drilling for oil and natural gas. In addition, the worldwide oil storage capacity is reaching its peak.
What does this mean for Propane?
Since producers are shutting in wells there will be less propane available to the market place in the long term. This could lead to higher prices. It might take a few months before the propane market feels the effects of loss production. Inventory levels are relatively high now, but as exports to China increase and lack of production could lead to higher prices for propane come this winter. Many propane producers are warning their customers now that product could be tight and prices could rise
Our recommendation is to fill up those propane tanks and enjoy historically low prices while you can.