Exec Summary: Market Movers: ONEOK could see upside from wider Conway-Mont Belvieu propane spreads. Rigs: $60 oil prices and market volatility continue to affect rig activity in the Permian. Flows: Volumes averaged 48.4 Bcf/d for the week of May 5, up 1% from 1Q25 Calendar: EDA provides updated Texas plant volumes 05/27
Market Movers:
- In a recent note to clients, East Daley Analytics noted the propane price spread from Conway to Mont Belvieu was temporarily elevated (see blue line graph in the chart below). The spread between Conway and Mont Belvieu propane prices normally trends around $0.05/gal or below, but began to widen at the end of February. It blew out to over $0.25 in late April when Mont Belvieu spot propane prices surged to $0.97/gal.
- Robust propane exports combined with more normal heating demand led PADD 3 propane inventory to fall sharply over the winter. The chart below shows EIA data for finished propane stocks in Gulf Coast storage facilities. Inventory fell to a low of 11.8 MMbbl for the week ending April 11, 39% below storage a year ago.
- Companies report that LPG export demand held strong at terminals in April, bucking fears of a slowdown as the US-China trade war escalated. With limited demand coverage in storage and April turning out to be a strong export month, prices shot higher for Mont Belvieu propane.
- What it means for ONEOK: EDA estimates our current Blueprint Financial Model is underestimating ONEOK’s 2Q25 earnings by $80-90MM due to the elevated Conway-Mont Belvieu spread, based on historical earnings capability when prices widen between the two markets. This makes sense because OKE’s Sterling III Pipeline carries purity product from Conway to Mont Belvieu and could have been used to capitalize on the price arbitrage.
Rigs:
- Although Targa has seen reduced rig activity due to lower WTI pricing, the long-term outlook remains strong. The producers backing TRGP’s system are predominantly Exxon, Conoco and Chevron. As upstream consolidation continues, TRGP should benefit through its relationships with the large integrated producers.
- Depressed rig numbers for the week of May 5 suggest further reductions in the Permian from weak WTI prices, but also could be rig moves. While pricing will affect rig activity in the long term, the short-term effects are expected to be more muted as contracts that support current drilling activity have already been executed.
Flows:
- DT Midstream’s sample is down 10% vs the current average in 2Q25. Much of the volume supporting DTM’s flow sample is from Blue Union in the Haynesville. Blue Union also has intrastate connections that transport volumes, and reduced flow samples can result from volumes migrating onto intrastate pipes.
- Energy Transfer’s flow sample is on the rise, trending up 4% vs the current average for 2Q25. The increase is predominantly seen on the collection of Haynesville systems supported by Diversified and the gathering system in Northeast PA supported predominantly by Expand Energy.
Calendar:
