How a Texas Hurricane Reshaped Global Propane Futures: The Mont Belvieu Story

When Hurricane Harvey slammed into the U.S. Gulf Coast in August 2017, few outside the energy sector realized they were witnessing a pivotal moment in the propane market. The storm didn’t just disrupt American energy production—it exposed how deeply the entire world’s liquefied petroleum gas (LPG) market depends on one location: Mont Belvieu, Texas.

The Unexpected Global Supply Chain

The Mont Belvieu propane hub sits at the crossroads of refineries, gas-processing facilities, underground storage caverns, and export terminals. When Hurricane Harvey shut down the Houston Ship Channel on August 25, 2017, it triggered a chain reaction across global LPG markets.

Here’s what shocked analysts: The price shock didn’t hit Mont Belvieu first. Instead, it struck Japan—destination of roughly two-thirds of U.S. seaborne LPG exports. On August 28, propane prices in the Far East surged 10% week-over-week, while Mont Belvieu propane rose a modest 2%. The U.S. market then caught up, rallying in tandem with Asian prices. This sequence revealed how integrated global propane futures have become, with Mont Belvieu serving as the pricing nerve center.

Setting the Stage: Pre-Harvey Inventory Pressures

But Harvey wasn’t the whole story. Inventory concerns had been building since March 2017, months before the hurricane made landfall. That winter ended with approximately 40 million barrels in stock—an early warning sign that U.S. propane supplies were tightening.

Before summer typically arrives with seasonal demand declines, Mont Belvieu propane’s ratio to crude oil should dip. Instead, it hovered in the mid-50s percentage range throughout spring and summer 2017, then accelerated upward from July onward, climbing above 70% by autumn. This wasn’t seasonal behavior—it signaled structural supply constraints.

The Rally Intensifies Post-Harvey

After the storm’s immediate aftermath, two factors prevented the expected quick recovery:

First, while export terminals reopened rapidly and loading programs resumed, propane exports never fully matched prior-year volumes. Second, domestic storage caverns faced constrained inflows due to NGL (natural gas liquid) supply disruptions. The combination squeezed local propane availability.

Within four weeks of the hurricane, Mont Belvieu propane strengthened from 70% of WTI crude oil to 78%—a dramatic compression that revealed how tight U.S. propane inventories had become. IHS Markit calculated the nation faced just 41.4 days of implied supply heading into winter 2017, the lowest level in five years.

By October 2017, Mont Belvieu propane’s ratio to crude oil exceeded the extremes seen during the January 2014 “polar vortex” cold snap—a benchmark traders use to measure crisis-level scarcity.

Ripple Effects: When Texas Prices Go Global

The Mont Belvieu price surge immediately transmitted across the Atlantic. Northwest European propane achieved a premium over naphtha for the first time in four years. Petrochemical crackers across Europe, which had been running high propane feedstock volumes for years, suddenly cut consumption to two-year lows and imported less than half of prior-year quantities.

Even Middle East pricing felt the pressure. Saudi Aramco, one of the world’s largest LPG exporters, set its contract price at $575/ton in October 2017—the highest level since $610/ton in November 2014.

Why Mont Belvieu Matters for Futures Traders

The rise of U.S. shale production fundamentally altered global LPG markets. The United States evolved from a net LPG importer to the world’s leading producer and exporter by the 2010s. Nasdaq Futures now uses OPIS North American LPG prices—essentially Mont Belvieu propane prices—as the settlement basis for all hedges and swaps.

This means every gallon of propane, butane, ethane, and natural gasoline traded globally references Mont Belvieu pricing. When U.S. inventory management shifts, it transmits instantly to propane futures markets worldwide. The 2017 rally demonstrated this interconnectedness in real time.

Looking Ahead: Capacity Constraints

As of early 2018, propane prices began tapering as export volumes normalized. However, energy analysts predicted additional marine export capacity would be needed by 2020-2021 to accommodate continued global demand growth. Any supply disruptions would again demonstrate how Mont Belvieu propane futures effectively set the price floor for global LPG markets.

The lesson from 2017: Understanding Mont Belvieu isn’t optional for global energy traders. It’s essential.