Since the start of the US-Iran conflict, propane prices have benefited from the sharp rally in crude oil. Prior to the conflict, domestic propane fundamentals offered little bullish upside for prices in the near term. The geopolitical disruption has now created a unique opportunity for producers to lock in stronger propane pricing despite an otherwise oversupplied market.
Recently, propane prices climbed above $0.90/gal, the highest price level since April 2025. Propane strengthened alongside crude in March as Middle East disruptions tightened global oil liquids balances. However, on a percentage-to-WTI basis, propane has weakened, falling from the mid-40% range in early 2026 to the low-30% range following the start of the conflict. The decline in the ratio suggests the recent strength has been driven (almost exclusively) by rising crude prices rather than improvements in propane’s own fundamentals.
Propane generally follows crude prices, but its relative value to oil is heavily influenced by domestic fundamentals. The relationship typically strengthens when propane inventories are low and weakens when inventories are elevated, as they are today. As illustrated by the latest EIA data, propane inventories continue to track well above both last year’s levels and the five-year average.
The US consistently produces more propane than it can consume domestically, making exports critical for balancing excess supply. However, this growing reliance on exports has also exposed a key structural constraint: limited export capacity. As a result, domestic inventories have remained elevated despite strong global LPG demand. While additional Gulf Coast export capacity is expected to come online over the next several years, associated gas production growth is still projected to outpace incremental export and demand growth through 2026, likely keeping the propane market oversupplied even as export flexibility improves.
The recent rally in propane prices appears to be primarily driven by crude-linked geopolitical risk rather than a meaningful improvement in propane fundamentals. With domestic inventories still elevated, propane prices could face renewed downside pressure if crude prices retreat or Middle East tensions ease.