Propane Prices

Propane is a by-product of natural gas processing and oil refining. U.S. demand is approximately one-third that of heating oil. Propane is used in diverse markets: residential cooking, crop-drying in agriculture, space heating in homes and industry, and as a feedstock for the production of vital petrochemicals. Natural gas utilities often store propane for use during periods of peak demand.The NYMEX Division propane contract trades in units of 42,000 gallons (1,000 barrels). It provides an effective pricing and risk management tool for the gas liquids sector of the energy industry. The contract is a natural complement to the NYMEX Division crude oil, heating oil, gasoline, and natural gas futures contracts.

In September of 2009, the New York Mercantile Exchange delisted the propane futures contract. Since propane gas is a by product of natural gas and crude oil, following crude oil futures and natural gas futures can give you the general trend of propane prices.

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Why do gasoline prices fluctuate?

Retail gasoline prices are mainly affected by crude oil prices and the level of gasoline supply relative to demand. Strong and increasing demand for gasoline and other petroleum products in the United States and the rest of the world is exerting intense pressure on available supplies. Even when crude oil prices are stable, gasoline prices fluctuate due to seasonal demand and local retail station competition. Gas prices can change rapidly if something disrupts the supply of crude oil or if there are problems at refineries or with delivery pipelines.

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Heating oil accounts for about 25% of the yield of a barrel of crude oil, the second largest cut after gasoline (petrol). The heating oil futures contract trades in units of 42,000 U.S. gallons (1,000 barrels) and (for the USA) is based on delivery in the New York harbor. Options on futures, calendar spread options contracts, crack spread options contracts, and average price options contracts give market participants even greater flexibility in managing price risk.The heating oil futures contract is also used to hedge diesel fuel and jet fuel, both of which trade in the cash market at an often stable premium to NYMEX Division New York Harbor heating oil futures.

source: NYMEX Inc

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What are heating oil futures?

Heating oil futures were first traded on the New York Mercantile Exchange (NYMEX) in 1978. With the United States lifting price controls on heating oil in the mid 1970’s, producers and consumers needed a way to hedge their price risks. Heating oil futures provide a liquid market place where they can come together to trade.

New York Harbor Heating Oil

Since the delivery point for these futures is New York Harbor area, the first users where local wholesalers and consumers. As the contract became more popular, others around the world were using it to hedge not only heating oil prices, but also diesel fuel prices and jet fuel prices. Heating oil represents about 25% of the yield of a barrel of crude oil. Heating oil is also referred to as No. 2 oil.

New York Heating Oil Futures Contract Specifications

One heating oil contract is 42,000 gallons (1,000 barrels), with the minimum price fluctuations being $.0001 per gallon, or $4.20 per tick.

NYMEX heating oil futures can be traded three ways. One way is via open outcry or pit trading on the floor of the exchange. Pit trading hours are Monday through Friday from 9am to 2:30 pm Eastern Time.

Heating oil trading on CME Globex takes place Sunday through Friday from 6pm until 5:15pm Eastern Time with a 45 minute break beginning at 5:15pm.

Trading on CME Clearport occurs during the same hours as Globex trading.

There are also e-mini heating oil contracts. These contracts are financially settled and are half the contract size of the regular futures contract.

NYMEX Heating Oil Options

Heating oil options were introduced in June of 1987. This allowed more flexibility for producers and users to hedge their risks. Options trading hours are the same as the futures hours.

Home heating oil futures are also used to trade crack spreads with gasoline futures and or crude oil futures. This allows refiners to lock in the price differentials between refinery output and input prices. This lets them profit or protect against adverse changes in those values.

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Heating Oil Prices

Natural Gas Futures

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Gasoline is the largest single volume refined product sold in the United States and accounts for almost half of national oil consumption. It is a highly diverse market, with hundreds of wholesale distributors and thousands of retail outlets, making it subject to intense competition and price volatility.The unleaded gas futures contract specifications conform to those for oxygenated gasoline, required in many areas for controlling emissions that can adversely affect air quality. With the ongoing phaseout of the oxygenate methyl tertiary butyl ether (MTBE) the industry is shifting towards ethanol.

The NYMEX Division New York harbor unleaded gasoline futures contract and reformulated gasoline blendstock for oxygen blending (RBOB) futures contract trade in units of 42,000 gallons (1,000 barrels). They are based on delivery at petroleum products terminals in the harbor, the major East Coast trading center for imports and domestic shipments from refineries in the New York harbor area or from the Gulf Coast refining centers.

RBOB conforms to industry standards for reformulated regular gasoline blendstock for blending with 10% denatured fuel ethanol (92% purity) as listed by the Colonial Pipeline for fungible F grade for sales in New York and New Jersey. RBOB is a wholesale non-oxygentated blendstock traded in the New York Harbor barge market that is ready for the addition of 10% ethanol at the truck rack.To ensure that the terms and conditions of the gasoline futures contract continue to mirror the cash market, the Exchange maintains close contact with federal and state officials and continues to evaluate changes in the regulations.Along with the futures contracts, options contracts, calendar spread options contracts, crack spread options contracts, and average price options contracts provide a slate of flexible, liquid financial instruments.The Exchange also lists for trading on the NYMEX ClearPort trading platform a series of gasoline swap futures contracts based on crack spreads and location differentials. Transactions in these contracts can also be consummated off-exchange and submitted to the Exchange for clearing through the NYMEX ClearPort clearing website.

Source: New York Mercantile Exchange, Inc

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Crude oil is the world’s most actively traded commodity, and the NYMEX Division light sweet crude oil futures contract is the world’s most liquid forum for crude oil trading, as well as the world’s largest-volume futures contract trading on a physical commodity. Because of its excellent liquidity and price transparency, the contract is used as a principal international pricing benchmark. Additional risk management and trading opportunities are offered through options on the futures contract; calendar spread options; crack spread options on the pricing differential of heating oil futures and crude oil futures and gasoline futures and crude oil futures; and average price options.

The contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the international spot markets via pipelines. The contract provides for delivery of several grades of domestic and internationally traded foreign crudes, and serves the diverse needs of the physical market.Light, sweet crudes are preferred by refiners because of their low sulfur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel.The e-miNYsm crude oil futures contract, designed for investment portfolios, is the equivalent of 500 barrels of crude, 50% of the size of a standard futures contract. The contract is available for trading on the Chicago Mercantile Exchange (CME) GLOBEX electronic trading platform and clears through the New York Mercantile Exchange clearinghouse.The Exchange also lists for trading electronically a financially settled futures contract for Dubai crude oil; a futures contract on the differential between the light, sweet crude oil futures contract and Canadian Bow River crude at Hardisty, Alberta; and futures contracts on the differentials of the light, sweet crude oil futures contract and four domestic grades of crude oil: Light Louisiana Sweet, West Texas Intermediate-Midland, West Texas Sour, and Mars Blend.The Brent blend futures contract is based on a light, sweet North Sea crude oil that serves as a benchmark grade and widely trades as a differential to the NYMEX Division’s bellwether light, sweet crude oil futures contract. Most of the crude oil is refined in Northwest Europe, but significant volumes move to the U.S. Gulf and East Coasts. Complementing the Brent crude oil futures contract are an options contract, calendar spread options contracts, and an options contract on the Brent/West Texas Intermediate crude oil spread.

source:NYMEX Inc.

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What Are Residential Customers Paying For in Their Natural Gas Bills?

Overview of Natural Gas Prices for the week ending November 3, 2010

* Price changes were mixed this week, with much regional variation across the country. At the Henry Hub in Erath, Louisiana, prices posted a net decline on the week of 2 cents, falling from $3.37 per million Btu (MMBtu) on Wednesday, October 27, to $3.35 per MMBtu on Wednesday, November 3.

* At the New York Mercantile Exchange (NYMEX), the December 2010 futures contract (which became the near-month contract on October 28) rose $0.073 from $3.763 per MMBtu last Wednesday to $3.836 yesterday.

* Working natural gas in storage increased to 3,821 billion cubic feet (Bcf) as of Friday, October 29, according to the Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report.

* The West Texas Intermediate crude oil spot price rose on the week from $81.9 per barrel (or $14.12 per MMBtu) to $84.45 per barrel ($14.56 per MMBtu).

* The natural gas rotary rig count, as reported Friday, October 29, by Baker Hughes Incorporated, rose by 2 to 967. The rig count has mainly remained flat over the past several months.

Overview of Natural Gas Prices for the week ending October 13, 2010

• Natural gas spot prices posted gains at most markets across the lower 48 States since Wednesday, October 6, accompanied by double-digit increases in trading since the holiday weekend. Price increases on the week ranged up to 25 cents per million Btu (MMBtu), with the Henry Hub natural gas spot price increasing $0.02 per MMBtu since last Wednesday, averaging $3.58 per MMBtu in trading yesterday, October 13.
• At the New York Mercantile Exchange (NYMEX), the futures contract for November delivery at the Henry Hub settled yesterday at $3.696 per MMBtu, falling by $0.169, or about 4 percent, since the previous Wednesday.
• Natural gas in storage totaled 3,590 billion cubic feet (Bcf) as of October 8, about 7.4 percent above the 5-year (2005-2009) average. The implied net injection for the week was 91 Bcf.
• The spot price for West Texas Intermediate (WTI) crude oil decreased by $0.18 per barrel since Wednesday, October 6, ending the report week at $83.03 per barrel, or $14.32 per MMBtu.

Overview for the week ending October 6, 2010

* Natural gas spot prices fell at most pricing point locations across the board in the lower 48 States as demand fell. The price at the Henry Hub fell 25 cents, or about 7 percent, since last Wednesday, September 29, from $3.81 per million Btu (MMBtu) to $3.56 per MMBtu.

* The West Texas Intermediate crude oil spot price settled at $83.21 per barrel, or $14.35 per MMBtu, on Wednesday, October 6. This represents an increase of $5.36 per barrel, or $0.92 per MMBtu, from the previous Wednesday.

* Working natural gas in storage increased to 3,499 billion cubic feet (Bcf) as of Friday, October 1, according to the Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report. Inventories are 220 Bcf greater than the 5-year (2005-2009) average for this time of year.

* At the New York Mercantile Exchange (NYMEX), the November 2010 contract fell about 10 cents or 2 percent from the $3.962 per MMBtu the previous Wednesday to $3.865 yesterday.

* The natural gas rotary rig count, as reported on October 1 by Baker Hughes Incorporated, fell by 5 from 967 to 962. Though this is the second week in a row the rig count has fallen, natural gas rigs have oscillated somewhat, from 947 on June 4 to 992 on August 13, over the past few months.

source: energy information agency

Overview (For the Week Ending Wednesday, September 29, 2010)

• Natural gas spot prices at most market locations in the lower 48 States decreased between 5 and 10 percent this report week (Wednesday to Wednesday, September 22–29). The week coincided with the first week of fall, a season in which demand is typically lower given the lack of extreme weather conditions across the country. During the report week, the Henry Hub spot price decreased by $0.21 per million Btu (MMBtu), or 5 percent, to $3.81 per MMBtu.
• The price of the October futures contract at the New York Mercantile Exchange (NYMEX) at final expiration on September 28 was $3.84 per MMBtu, or about 3 cents more than the price of the contract at the end of its first day of trading as the near-month contract on August 30. The November contract finished the report week at a price of $3.96 per MMBtu, or 13 cents lower than the previous Wednesday.
• During the week ending Friday, September 24, estimated net injections of natural gas into underground storage totaled 74 billion cubic feet (Bcf). Working natural gas in underground storage was 3,414 Bcf, which is 6.3 percent above the 5-year (2005-2009) average.
• The West Texas Intermediate (WTI) crude oil spot price increased $4.87 per barrel during the report week. The WTI crude oil spot price averaged $77.85 per barrel yesterday (September 29), or $13.42 per MMBtu.

The price of natural gas has two main parts (all cost estimates include a number of taxes):Transmission and distribution costs – to move the natural gas by pipeline from where it is produced to the customers local gas company, and to bring the natural gas from the local gas company to your house.Commodity costs – the cost of the natural gas itself.In the past five winters (2002-2003 through last winter) the cost of natural gas at the wellhead (commodity cost) has constituted more than 50 percent of the residential price,and this trend is expected to continue through the next winter (Figure 1). This relative cost pattern differs from earlier years in which the commodity cost was consistently below 50 percent. The large commodity cost share has resulted from unusually high prices for natural gas during these winters. The high prices were driven by market conditions that included weak natural gas production despite increased drilling levels, colder-than-normal weather for long periods during some heating seasons, production disruptions from hurricane activity in the Gulf of Mexico, fluctuating net import levels, and record high crude oil prices.

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Natural gas accounts for almost a quarter of United States energy consumption, and the NYMEX Division natural gas futures contract is widely used as a national benchmark price. The futures contract trades in units of 10,000 million British thermal units (mmBtu). The price is based on delivery at the Henry Hub in Louisiana, the nexus of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border. An options contract and calendar spread options contracts provide additional risk management opportunities.

The spread between natural gas futures and electricity futures  the spark spread  can be used to manage price risk in the power markets.Because of the volatility of natural gas prices, a vigorous basis market has developed in the pricing relationships between Henry Hub and other important natural gas market centers in the continental United States and Canada. The Exchange makes available for trading a series of basis swap futures contracts that are quoted as price differentials between approximately 30 natural gas pricing points and Henry Hub. The basis contracts trade in units of 2,500 mmBtu on the NYMEX ClearPortsm trading platform. Transactions can also be consummated off-Exchange and submitted to the Exchange for clearing via the NYMEX ClearPortsm clearing website as an exchange of futures for physicals or exchange of futures for swaps transaction.The e-miNYsm natural gas futures contract, designed for investment portfolios, is the equivalent of 5,000 mmBtu of natural gas, 50% of the size of a standard futures contract. The contract is available for trading on the Chicago Mercantile Exchange (CME) GLOBEX electronic trading platform and clears through the New York Mercantile Exchange clearinghouse.

Source New York Mercantile Exchange, Inc.

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Here are the current propane prices as reported by the EIA for the week ending 11/16/2009

Residential Propane Prices Increase

The average residential propane price rose 2.7 cents per gallon to reach 224.0 cents per gallon. This was a decrease of 20.3 cents per gallon compared to the 244.3 cents per gallon average from the same period last year. Wholesale propane prices dropped 2.1 cents per gallon, from 119.1 cents per gallon to 117.0 cents per gallon. This was an increase of 32.8 cents per gallon when compared to the November 17, 2008 price of 84.2 cents per gallon.

Propane Inventories Experience Large Drop
After reaching an 11-year high in October, inventories of propane settled in the lower half of the average range for this time of year, as seasonal demand increases. Total U.S. propane inventories fell by 2.9 million barrels to 65.5 million barrels. The Midwest regional stocks drew 1.6 million barrels and the Gulf Coast region drew 1.4 million barrels. The Rocky Mountain/ West Coast region drew 0.1 million barrels of inventory and the East Coast regional stocks experienced a build of 0.2 million barrels. Propylene non-fuel use inventories increased their share of total propane/propylene inventories from 3.3 percent to 3.4 percent.

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Here are the average propane prices across the state of  Pennsylvania for the week of 11/16/2009. use these averages as a guide when shopping for your next propane gas purchase.

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Here are the weekly propane prices and heating oil prices in Pennsylvania for the week ending 11/9/2009

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