Global Energy Weekly: Driving season revs up gas liquids

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Global Energy Weekly: Driving season revs up gas liquids

pressure propane… See Team Page for List of Analysts

US propane spreads to Asia and Europe spiked during the onset of the Iran war as

international markets scrambled to replace lost Mid-East cargos. Even though spreads

have come off their highs, they are still relatively wide and are likely spurring some

flexible US capacity to prioritize propane exports. Record propane exports have reduced

the propane inventory surplus, yet stocks are at seasonal high levels. With the US-Iran

See Exhibit 42 for abbreviationsceasefire and MOU falling apart in recent weeks, we could see global propane

benchmarks rally as international buyers assess the risk of Mid-East supply disruptions.

But persistent production growth and high stocks are likely to keep propane prices under

pressure relative to international markers.

…but low stocks and refineries could spark butane rally

Due to fuel supply concerns from geopolitical disruptions impacting global oil and

refined product flows, the EPA has expanded the ability to blend more butane into

gasoline this summer. The summer blending restrictions have historically led to large

summer butane inventory builds. However, this year the EPA blending waivers combined

with the increase in exports have quickly depleted butane inventories. As conflicts in the

Middle East and Russia impact fuel exports, many regions are facing low refined product

inventories which could spark higher gasoline prices (see The crude reality of oil

markets). With butane stocks quickly drawing down, the pull from export markets and

refinery demand could force butane to be more connected to gasoline heading into

winter.

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