OREANDA-NEWS. December 28, 2017. Propane prices in the US midcontinent could strengthen in the first quarter of 2018 if below-normal temperatures continue in parts of the midcontinent during January and February.

Temperatures across the northern midcontinent are expected to be below average in January and February, while the rest of the region is expected to see normal temperatures, according to the National Oceanic and Atmospheric Administration's (NOAA) outlook.

Beyond heating demand, propane at the Conway, Kansas, hub is seeing steady southbound demand as the Conway/Mont Belvieu, Texas, arbitrage remains unseasonably wide with the discount for Conway propane relative to the LST cavern averaging 6?/USG in December. During the same month last year Conway propane was valued at a 1?/USG discount to the LST cavern.

Propane prices on the Gulf coast continue to see support from exports, keeping that arbitrage open. Steady production of natural gas liquids in the midcontinent and surplus inventories accumulated in September helped keep PADD 2 inventories at a level of 23.6mn bl as of 15 December.

Large volumes of unfractionated natural gas liquids were redirected to the midcontinent from the Gulf coast in September because of flooding from Hurricane Harvey, resulting in increased supplies in the midcontinent heading into the fourth quarter. Propane stocks in PADD 2 stand 5pc below last year's level while the Gulf coast supply is 35pc below 2016 at around 37.7mn bl.