Propane News

Weekly Inventory Results

7/20/22-U.S. propane/propylene inventories grew by 1.4 MMbbl for the week ending July 15, which was below the industry average estimate of 2.2MMbbl. The disappointing build was primarily due to PADD 1 (East Coast) where stocks fell by 0.4 MMbbl.

PADD 1 (East Coast) inventories fell by 416 Mbbl. Total inventories are now 5.0 MMbbl and stocks are 1.3 MMbbl below 2021 and only slightly above the 5-year minimum by 32 Mbbl. PADD 1 stock builds have been well below the 5-year average this year primarily due to strong exports out of Marcus Hook to Europe.

Weekly exports of propane reported by the EIA declined sharply to 1.1 MMbbl/d, however, 4-week average exports remain robust at 1.4 MMbbl/d. We expect propane exports to stay at healthy levels, well above this week’s low rate, averaging around 1.3 MMbbl/d. 



 

EAST COAST EXPORTS

East Coast propane exports from Marcus Hook declined to a still-strong rate of 170 Mb/d in May, down 56 Md/d from April’s record high. We see the recent ramp-up of 

the Mariner East 2 pipeline to full capacity as a significant factor keeping East Coast exports high for the rest of 2022. PADD 1 exports in June are expected stay strong at 

175 Mb/d, up 5 Mb/d from April. There were no PADD 1 waterborne imports in May; however, we do expect imports to resume like last year, with the possibility of 

one or two small import cargoes to fill tank capacity this summer. 

 

CROP-DRYING DEMAND

It’s still early, but we expect crop-drying demand to be stronger than the low levels in 2021 and close to the 5-year average. This year’s corn-planting season has started 

later than normal, which is likely to push back the harvest timing. 

 

INSIGHTS & ANALYSIS

PADD 1 (East Coast) had a modest inventory build in May of slightly less than 1 million barrels, or about 100 Mbbl less than the 5-year average. Strong

exports kept stocks in check, ending May at 4.4 MMbbl (185 MMgal). This puts PADD 1 inventory at 146 Mbbl below the 5-year average and 1.2

MMbbl lower than 2021. Gas plant production in May was flat at 223 Mb/d. 

 

PADD 1 OUTLOOK

Our propane model projects PADD 1 inventories to build by 0.6 MMbbl in June to 5.0 MMbbl (210 MMgal), leaving stocks 0.4 MMbbl below the 5-year 

average. East Coast exports are expected to decline by 5 Mb/d in June to 175 Mb/d and average 154 Mb/d for 2022, 14 Mb/d 

higher than last year. PADD 1 total production is expected to be flat in June-August at 238 Mb/d and range between 230-240 Mb/d for the rest of the 

year. For the 2022 injection season, we estimate PADD 1 inventories will grow by 3.0 MMbbl to 7.0 MMbbl, which is 0.6 MMbbl below the 5-year 

average.

 


 

 Factors Affecting Domestic Inventories

 Domestic propane supply is affected by primarily four factors (Exports, Petrochemical Demand, Crop Drying and Weather).  

  1. Exports - Exports have become one of the largest factors impacting inventories, especially in PADD 3, the Gulf Coast area.  As export terminals continue to be constructed in the Gulf Coast, this factor will play a larger role in overall domestic inventory.
  2. Petrochemical Demand – Since the domestic supply situation is improving with more production coming from the shale regions, petrochemical companies will continue to rely on natural gas liquids (NGLs) as their primary feedstock.
  3. Crop Drying – Agriculture continues to be the largest industry in the US.  Propane plays a critical role in removing moisture from crops to avoid spoilage in storage.  When crops have high moisture content, propane supply is affected significantly over a relatively short period of time.  In the fall of 2013, agriculture in the Midwestern states alone consumed over 325M gallons of propane.  This significant draw on supply did not allow inventories to recover all winter.
  4. Winter Weather – One of the smallest primary inventory sectors is PADD 1, which covers the Northeast and Middle Atlantic areas of the country.  Extended cold weather can have a significant impact on supply availability. Propane continues to be a primary fuel as a heat source in this part of the country.

 

Prebuys

When discussing prebuy options with our customers, it is our belief that you should sell what you buy and buy what you sell.  Most traders will readily admit that they cannot predict what the market will do.  As a retailer, we believe the same holds true.  When it comes to prebuy positions, you should be evenly hedged.  Prebuys can provide a nice hedge for those customers looking to lock in gallons and pricing for the year.  Please let us know if you are interested in this program.