Understanding the separation between crude and propane
November 16, 2020 By Mark Rachal
Normally, there is a fairly close correlation between the price direction of propane and crude, but sometimes they…
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Normally, there is a fairly close correlation between the price direction of propane and crude, but sometimes they…
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Developments in crude production and pricing should be watched carefully to see how that translates to propane production and pricing leading up to winter.
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As citizens sheltered in place, there was a dramatic shift in crude demand, leading to an extreme oversupply that has most available crude storage nearing capacity.
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In addition to crude’s collapse, Rachal discusses the propane pricing and supply environment. COVID-19 will have a greater impact on propane supply than it will on propane demand, he says.
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While Saudi Arabia has called an emergency meeting of OPEC+, there is little doubt that U.S. production growth is very likely to slow in the future.
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The price of crude has rebounded a little since, but the potential for it to go lower is still present due to demand destruction from COVID-19 and producers not cooperating to limit production.
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October has turned out to be quite frightening for crude and propane bulls. The upward momentum that had been prevalent since April came to a screaming halt.
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A report from the U.S. Energy Information Administration (EIA) examines U.S. propane’s relationship with world propane prices and crude oil prices.
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Any forecast on propane prices begins with trying to determine where crude will be priced.
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Recently, propane prices have not gone beyond 78 to 80 percent of West Texas Intermediate (WTI) crude’s price.
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