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Propane market weakens as inventory gain outweighs oil rally

Thepropane market fell less than a penny in the week ended Sept. 30 amid a sharpincrease in the level of propane stocks, while a rebound in the oil marketfollowing an OPEC agreement to reduce production added support.

LoneStar pipeline grade propane at Mont Belvieu, Texas, dropped 0.10 cent to tradeat 49.95 cents per gallon in the week ended Sept. 30, while non-LST propanealso lost 0.10 cent to trade at 49.85 cents per gallon. Prices at the hub inConway, Kan., fell 0.15 cent and traded at 44.70 cents per gallon.

Thefractionation spread, or frac spread, rose 0.27 cent to trade at 17.68 centsper gallon on Sept. 29 compared to 17.41 cents per gallon on Sept. 22. Naturalgas futures fell 1.0% during the survey period while the average NGL barrel wasunchanged.

Thefrac spread is the difference between the weighted average price of natural gasliquids and the price of natural gas on a Btu basis. It is a general indicationof the profit margin that a natural gas processor would expect to receive whenthe liquids are fractionated.

Althoughthe weekly price change in propane was small, the market experienced anothervolatile week in inventory figures. Inventories of propane and propyleneincreased 1.52 MMbbl to reach 103.26 MMbbl in the week ended Sept. 23,according to the U.S. Energy Information Administration. Inventories are on apath to retest the peak made last year in the week ended Nov. 20, 2015, at 106.20MMbbl.

Thesurplus to the five-year average grew to 28.10 MMbbl and compared to 27.54MMbbl in the previous week. The record surplus was set in the week ended Nov.20, 2015, at 39.60 MMbbl.

Helpingthe gain in propane inventories was a sharp decline in exports, which fell 497Mbbl/d to 578 Mbbl/d. The previous week's figure had reached a record of 1.08MMbbl/d.

Outsideof propane, markets were mixed, with natural gas falling and crude oil gaining.November crude oil rose $3.76/bbl during the week and settled at $48.24/bbl onSept. 30.

Oilprices were boosted by the agreement from OPEC members to target production in arange between 32.5 MMbbl/d and 33.0 MMbbl/d in order to accelerate the ongoingdrawdown of the stock overhang. OPEC produced 33.24 MMbbl/d in August,according to its "Monthly Oil Market Report" published Sept. 12.

Novembernatural gas futures ended the week with a drop of 10.7 cents and settled onSept. 30 at $2.906/MMBtu.

of natural gasincreased 49 Bcf in the week ended Sept. 23, according to the EIA. The figurewas below the market consensus, which called for a build of 54 Bcf, and wasalso below the 99-Bcf injection reported for the same week in 2015 and thefive-year average injection of 97 Bcf.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.