Allocated pipelines and terminals and potential brine issues at the Conway, Kansas, storage facility are likely behind the 25.3% spike in propane prices at the Midcontinent NGL trading hub this week, sources said Friday.
On Friday, Conway propane was assessed at $1.7515/gal, up 13.15 cents compared with Thursday.
Issues over the past two days have pushed regional prices to over a five-year high and the Conway price premium to Mont Belvieu rose to 36.9 cents on Friday. Conway propane traded at a discount to Mont Belvieu propane for nearly all of 2013.
Data released by the US Energy Information Administration on Wednesday showed that propane stock levels fell 1.5 million barrels to 11.5 million barrels in the week ending January 10.
That stock level is the lowest on record for the second week of January, according to the EIA. But, sources said the sudden and severe move in prices was being fueled by logistical issues.
"All major pipelines and terminals that source propane from Conway are on allocation," said Peter Fasullo of consulting firm EnVantage. "It is possible that propane wholesalers and retailers are bypassing the pipes and terminals and are going directly to Conway to source their propane."
Allocations occur when demand for line space exceeds capacity and results in prorated shipper nominations.
Some sources said that brine "issues" at Conway could be aggravating the problem.
"The rumor is that there are brine issues," an NGL trader said.
Conway, like its US Gulf Coast counterpart Mont Belvieu, relies primarily on underground salt dome formations to store product. Brine is pumped into the storage wells to force NGLs out. If the wells are tight on supply that can also mean that brine pools are also running low, making it difficult to force out marginal barrels.
"It is possible that the caverns at Conway can't pump out enough propane to meet that spot demand. Whether there are actual brine problems is hard to say," Fasullo said.
Enterprise's MAPL pipeline runs northeast from Hobbs, New Mexico, into Conway before it continues elsewhere in the Midcontinent.
Enterprise has 8.6 million barrels of NGL storage capacity in Kansas and several NGL terminals connected to the section of the MAPL system north of Conway.
Oneok's North System also runs north from Conway and can transport up to 134,000 b/d, with additional capacity under lease, according to Oneok's website. The pipeline transports NGL purity products and various refined products, including unleaded gasoline and diesel fuel throughout Midwest markets. This system includes about 978,000 barrels of storage capacity, both in caverns and above-ground tanks, and eight NGL terminals.
Oneok and Enterprise were unavailable for comment Friday.
