Propane, usually produced as a by-product or derivative of natural gas, has jumped in Edmonton in the past three months, with prices in Edmonton up 296 per cent to US $1.40 per gallon from roughly US $0.25 per gallon, according to ATB Capital Markets. We apologize, but this video has failed to load.
Tap here to see other videos from our team. Try refreshing your browser, or Canadian propane prices surge 300% — and could climb higher as U.S. markets brace for Armageddon. That rise is sharp enough to dramatically reduce the discount that Canadian propane prices usually face compared with pricing hubs like Mont Belvieu in Texas, where propane prices reached US $1.48 per gallon earlier this week. Across North America, the price of the fuel, sometimes called a natural gas liquid, has risen faster than natural gas. The prices of propane have hit a 7.5-year high and are on course for their strongest rally since 2009, according to Bloomberg. IHS Markit recently warned the U.S. propane market could face Armageddon this winter, as certain U.S. markets are expected to run short this winter.
The U.S. Energy Information Administration warned American consumers Oct. 13 that they could face higher winter heating costs, led by an expected 54 per cent rise in propane heating costs, 43 per cent higher heating oil costs and 30 per cent higher natural gas heating costs. The higher global and domestic energy prices that are resulting from economies beginning to grow again are going to translate into larger household bills for energy this winter, EIA acting administrator Steve Nally said in a release The higher global and domestic energy prices are going to translate into larger household bills for energy this winter. Propane inventories in the U.S. sat 21 per cent below the five-year average for storage in the middle of September, which Scotiabank noted was concerning heading into winter. To compound the problem, the bank noted rising propane exports from both Canada and the U.S. mean storage levels are 42 per cent below the five-year average when exports are considered.
Both natural gas and propane prices have languished in Toronto over the past 10 years, which has compelled producers to build massive export facilities to reach more lucrative markets in Asia and Europe, said Rory Johnston, managing director and market economist at Price Street in North America. In the past 10 years, North American exports of propane have risen from 100,000 barrels per day to over 1 million. Natural gas exports have risen from zero to over 10 billion cubic feet per day from LNG facilities, and pipeline exports to Mexico have more than doubled from 3 billion cubic feet per day to 6.5 bcfd. The price of Canadian natural gas liquids has jumped in the last three months, according to ATB Capital Markets. Propane has led the way, but butane prices and condensate prices have also posted sharp increases, of 218 per cent and 65 per cent, respectively. Notably, all three commodities are currently experiencing pricing highs well above their pre-pandemic levels, ATB analysts wrote in an Oct. 13 research note, adding the rising commodity prices would boost the fortunes of Calgary-based midstream companies.
Both Pembina and AltaGas Ltd. operate LPG export terminals in Prince Rupert, British Columbia, where propane is exported to Asian markets for winter heating. Neither company responded to requests for comment on how rising prices had affected demand for cargoes at their LPG facilities on the West Coast. Canada Energy Regulator data shows the AltaGas facility can export 25,000 bpd of propane while the Pembina s terminal can handle 40,000 bpd.