Prices for fuel stored in the salt caverns of Mont Belvieu, Texas, have gone a little berserk.
Three companies, Enterprise Products Partners LP, Targa Resources Corp. and Lone Star NGL LLC, use the caverns to keep natural gas liquids that are traded on the spot market and exported around the world. Butane price fluctuations between the three are usually within a penny or two.
But in December, Enterprise’s butane price spiked as much as 30 cents a gallon higher than the same fuel kept in a cavern that is just footsteps away. Trading volume tripled its monthly average.
Kelly Van Hull, director of energy analytics at Houston-based consultancy RBN Energy said: “The market just went crazy.
“Everybody was off — it was literally Christmas week — and perfectly bad timing for somebody to come up short.”
Sudden price volatility can bedevil propane and butane traders and brokers. Reasons vary. Demand can swing, supply can ebb or rise, and every once in a while a trading desk takes a stab at manipulating the market.
The last explanation is not unheard of. BP Products North America paid $303 million in 2007 to settle charges by the U.S. Commodity Futures Trading Commission that it tried to corner Mont Belvieu’s propane market.
BP declined to comment.
December’s price whiplash still has market participants scratching their heads.
Some traders, brokers and analysts, who requested anonymity, said it might be a case of investors covering short sales. Some said record-high shipments abroad took a bite out of tight supplies.
But none were able to come up with a definitive explanation.
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