Prices for fuel stored in the caverns of Mont Belvieu, Texas, have gone a little berserk.

Three companies, Enterprise Products Partners LP, Targa Resources Corp. and Lone Star NGL LLC, use the caverns to keep natural gas liquids that are traded on the spot market and exported around the world. Butane price fluctuations between the three are usually within a penny or two.

But in December, Enterprise’s butane price spiked as much as 30 cents a gallon higher than the same fuel kept in a cavern that is just footsteps away. Trading volume tripled its monthly average.

“The market just went crazy,” said Kelly Van Hull, director of energy analytics at Houston-based consultancy RBN Energy. “Everybody was off -- it was literally Christmas week -- and perfectly bad timing for somebody to come up short.”

Sudden price volatility can bedevil propane and butane traders and brokers. Reasons vary. Demand can swing, supply can ebb or rise, and every once in a while a trading desk takes a stab at manipulating the market. The last explanation is not unheard of. BP Products North America paid $303 million in 2007 to settle charges by the U.S. Commodity Futures Trading Commission that it tried to corner Mont Belvieu’s propane market. BP declined to comment.

December’s price whiplash still has market participants scratching their heads. Some traders, brokers and analysts, who requested anonymity, said it might be a case of investors covering short sales. Some said record-high shipments abroad took a bite out of tight supplies. But none were able to come up with a definitive explanation.

Polar Vortex

“I’ve traded NGLs for about 10 years, so I’ve seen a lot of things,” said Joe Sevick, research director for Houston-based Wood Mackenzie and a former trader for Castleton Commodities International and BP Plc. “With the exception of the polar vortex, I haven’t really seen structure like this.”

In January 2014, at the height of that winter’s attack of frigid air, propane traders went on an even wilder ride than what’s happening now. Mont Belvieu’s Midwest counterpart, a storage site in Conway, Kansas, saw wholesale propane prices rise 180 percent in three trading sessions. This month, Mont Belvieu propane at the Enterprise terminal swung by a narrower 16 percent in two sessions.

Ships at U.S. docks fill up the equivalent of two very large gas carriers full of propane each day. The ships sail to destinations all over the world, from the East Coast of Mexico to ports in Japan. Each ship holds the equivalent of 23 million gallons of fuel, or 4.6 million propane cylinders like the ones used to grill burgers.

The best commodity traders know how to take advantage of changing storage capacity when prices swing. The so-called contango play makes it possible to lock in profits by storing supplies to be sold in the future at higher prices.

Chaos Opportunities

Jim Teague, Enterprise’s chief executive officer, praised the firm’s traders for their mastery of contango in a Jan. 30 conference call with analysts. The team takes “advantage of opportunities that invariably present themselves when chaos occurs,” Teague said.

Representatives for Targa and Lone Star didn’t return requests for comment. Enterprise declined to comment on Mont Belvieu price fluctuations.

Following the December spike in butane, chaos broke out again at Mont Belvieu, this time among traders of the heaviest NGL, natural gasoline. Enterprise prices plunged relative to those at the nearby Lone Star terminal. Storage constraints seemed to be the culprit. Mont Belvieu, 30 miles east of Houston, was recovering from floods that could have threatened the salt content of brine ponds that are important to fuel storage.

NGL storage depends on the brine, which is injected or removed from the underground sites to control the flow of fuel. Brine is heavier than propane, so it settles at a lower layer. When NGLs go into the cavern, brine flows out and into above-ground containment ponds. To remove propane from the well, brine is re-injected into the cavern to push propane out.

Even with the flooding, Enterprise said the caverns were usable. As the price of Enterprise natural gasoline sank by 21 percent in one session on Jan. 23, the February-to-March contango nearly doubled in value to 8.125 cents from 4.375 cents, New York Mercantile Exchange data show.

Three days later, Enterprise announced it would be auctioning 300,000 to 1 million barrels of storage space in its caverns from Jan. 26 through Dec. 31 at a starting bid of 10 cents a gallon, according to a recipient of the offer. The tender closed the same day it opened, and by the session’s end the contango had fallen back to 4.625 cents.

“It’s enough to make the market screwy,” said RBN Energy’s Van Hull. “It wouldn’t surprise me if we continue to see volatility.”