Propane News

Weekly Inventory Results

5/15/19-U.S. propane/propylene stocks increased by 2.8 million barrels last week to 62.7 million barrels as of May 10, 2019, 10.3 million barrels (19.7%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Gulf Coast, Midwest, East Coast, and Rocky Mountain/West Coast inventories increased by 1.6 million barrels, 0.6 million barrels, 0.4 million barrels, and 0.2 million barrels, respectively. Propylene non-fuel-use inventories represented 8.9% of total propane/propylene inventories.

NPGA Propane Inventory Report Summary

April 2019

Strong build season expected while growing exports will limit growth in days of disposition

The EIA weekly estimates of propane stocks have reported builds every week since the week ending March 8, 2019. In 2018 and 2017, strong consistent builds did not begin until the end of April. Going forward, the monthly forecast calls for a continued strong build through the first three quarters of 2019 as increased propane production outweighs the effect of expected strong exports. Total stocks are predicted to return to levels seen in 2015 and 2016 before exports started in earnest, upon completion of the slate of the currently existing export terminals. On the other hand, in the fourth quarter, global north winter weather demand will help strengthen exports just after Enterprise's export terminal expansion comes online (expected in the third quarter) increasing the likelihood for much stronger exports than seen before. The forecast increase in exports will be enough to pull stocks back below end of year 2015 and 2016 levels.

Strong exports, throughout the year, are expected to attenuate the changes in days of disposition over the year relative to the changes seen in stock levels. While total stocks are expected to rapidly rise to the levels seen in 2015 and 2016, days of disposition will not rise to similar levels, given the increased demand pull. The forecast does show a rapid increase in days of disposition above what was seen through 2017 and 2018 as stocks build, but if we do see the forecast increase in exports in the last quarter of the year, that demand will help pull days of disposition back down to the levels seen at the ends of 2017 and 2018. As to pricing, the rapid recovery of days of disposition through the first three quarters of the year suggest a continued depression in propane's price relative to crude. If exports do increase strongly in the fourth quarter, as expected, and pull availability back down, we can expect some upward pressure on propane pricing at the end of the year.


 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.



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.