Propane News

Weekly Inventory Results

10/2/19-U.S. propane/propylene stocks increased by 1.0 million barrels last week to 100.6 million barrels as of September 27, 2019, 13.0 million barrels (14.8%) greater than the five-year (2014-18) average inventory levels for this same time of year. Midwest, Gulf Coast, and East Coast inventories increased by 0.5 million barrels, 0.4 million barrels, and 0.2 million barrels, respectively. Rocky Mountain/West Coast inventories decreased by 0.1 million barrels. Propylene non-fuel-use inventories represented 4.3% of total propane/propylene inventories.



NPGA Propane Inventory Report Summary

August 2019

The August 2019 trend report.

During the month of August, Mont Belvieu propane prices traded around 40 cents per gallon (cpg), down from around 66 cpg in March of this year. During this same period, WTI crude oil prices have averaged around $58 per barrel. Increasing propane supplies with limited outlets have temporarily disconnected the propane price from the crude oil price. Over this same period the propane price as a percentage of crude oil has fallen from around 48% to around 31%, average daily basis. The propane price is expected to remain relatively weak as compared to crude oil for the coming months and likely trading in a range of 34 to 42%.

Propane export terminal capacity additions, seasonal demand (Heating Degree Days and crop drying season), and petrochemical feedstock demand will provide price support for propane in the coming months. Propane export terminal capacity additions expected during the 3rd and 4th quarters of this year could provide incremental demand in the range of 0.2 million to 0.4 million barrels per day by year end. Seasonal demand in the form of cooler temperatures are inevitable. Incremental demand from crop drying season is a wildcard and early indications point to a delay in the start of the season. Lower corn prices at harvest point to producers delaying harvest allowing for additional field drying and the avoidance of artificial drying costs. Lower propane prices in the very short term, over the next two months or so, favor propane as the preferred feedstock for ethylene production as compared to other petrochemical feedstocks. For much of the month of August, propane has moved into a cost advantaged position; increases in demand will follow but could be short lived as winter approaches.


 

 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.