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Permalink Reply by Corvette on December 30, 2014 at 1:49am

I called about heating oil yesterday and it is $ 2.64 a gallon. Never thought I would see it that low again.

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Permalink Reply by Philip Brutz on December 30, 2014 at 6:01am

Propane, Other Fuel Prices Feel the Burn as Oil Declines

By Dow Jones Business News,  December 21, 2014, 06:50:00 PM EDT

Read more: http://www.nasdaq.com/article/propane-other-fuel-prices-feel-the-bu...

Sinking oil prices are taking propane, butane and other products used in the chemicals industry and home heating along with them.

The fuels, called natural-gas liquids, are a byproduct of oil and gas drilling and are used to heat homes, fire up grills and make plastics. So-called NGLs have been a source of profits for energy producers because their prices, until recently, stayed high even as natural-gas prices dropped. Chemical companies have expanded their U.S. production to take advantage of plentiful supply.

But prices for NGLs--which include ethane, propane, butane, isobutane and natural gasoline--have turned sharply lower in recent months. From Sept. 1 to Dec. 15, the price of all the aforementioned NGLs except ethane dropped at least 40%, according to Oil Price Information Service. Ethane prices dropped 23%.

Prices for the fuels are closely linked to oil, so a sharp drop in crude prices has exerted downward pressure. A glut in the U.S. is also weighing on these markets. Propane and butane are at more than 10-year lows, down nearly half since the start of September, according to Oil Price Information Service, which tracks these markets.

The low cost of propane will help the roughly 5% of American households that use the NGL for heating to save anywhere from 20% to 34% this winter, the U.S. Energy Information Administration said recently. Producers in the U.S. Northeast are likely to be among the biggest losers from the retreat, according to Citigroup Inc. These companies had stepped up drilling in NGL-rich areas in Ohio and Pennsylvania, counting on the fuels to add several dollars to the value of every barrel of oil produced. But pipeline space to carry NGLs out of the region is limited, which is expected to worsen a regional glut, Citi said.

"Things look pretty ugly overall," said Francisco Blanch, commodities and derivatives strategist at Bank of America Merrill Lynch. "It really is an amazing amount of supply, and it's very difficult to place fast. That's created consistent selling pressure."

Many chemical companies were relying on a cheap supply of NGLs to give them a competitive advantage over companies abroad that rely on the oil product naphtha. But as oil falls and naphtha also becomes cheaper, it erodes some of the competitive advantage NGL users had counted on when they budgeted billions for expansion projects.

Surging U.S. operations for LyondellBasell Industries NV and Dow Chemical Co. have made them two of the biggest beneficiaries of the shale boom, but now they could be among the biggest losers of the continuing oil-price crash, Credit Suisse said. LyondellBasell shares have shed 28% of their value since early September; Dow has lost 16%.

LyondellBasell's Sergey Vasnetsov, senior vice president of strategic planning and transactions, said his company's U.S. business remains "quite profitable" at current crude oil, NGL and natural-gas prices.

Dow has plants around the world that can benefit from low oil prices, its officials said. They also believe investors are wrong to think NGL-fed plants in the U.S. wouldn't have advantages if all those fuels have dropped in price.

"The net effect is that in the long term, a more stable oil price and stable markets will drive GDP growth and consumer spending, which is a good thing for Dow," said Mauro Gregorio, Dow's president of feedstocks and energy.

Falling NGL prices have been a draw for traders. The number of outstanding propane futures contracts on the New York Mercantile Exchange has quadrupled since May. Propane futures ended Friday down more than 50% for the year.

As oil markets collapsed, energy and commodities firm Vitol Group became one of the big NGL sellers, according to people with knowledge of its trading. One of those people said Mercuria Energy Group and BP PLC have also been taking positions that would benefit from falling prices.

Vitol and BP declined to comment. Mercuria didn't respond to requests for comment.

Read more: http://www.nasdaq.com/article/propane-other-fuel-prices-feel-the-bu...

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