Propane News

Weekly Inventory Results

8/9/18-U.S. propane/propylene stocks increased by 0.1 million barrels last week to 66.4 million barrels as of August 3, 2018, 9.3 million barrels (12.2%) lower than the five-year (2013-2017) average inventory level for this same time of year. Gulf Coast inventories increased by 0.3 million barrels and Rocky Mountain/West Coast inventories rose slightly, remaining virtually unchanged. Midwest and East Coast inventories decreased by 0.2 million barrels and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 4.3% of total propane/propylene inventories.

NPGA Propane Inventory Report Summary

July 2018

Middle East exports in June to Asia fell drastically in the latest IHSMarkit Waterborne LPG report leading to Asian buyers turning to the US to meet their propane chemical demand needs. The propane to naphtha spread this summer thus far has led to high PDH utilization rates in Asia. These two factors combined led to much higher Japan to Mont Belvieu propane differentials that those that were witnessed last summer incentivizing spot export barrels in June and July.

Due to the record high summer exports thus far, the pace of inventory growth slowed significantly and it now appears that exports are keeping up with continuously growing record high gas plant production of propane. The higher exports over the past month led the US to have a non-seasonal stock withdrawal last week.

The forward curve for the Japan/Mont Belvieu propane spread is showing further strength over the winter months. The updated forecast for the autumn continues to show record low days of disposition. In the winter months the forecast has been updated to show the effects of slower autumn inventory builds due to the record high exports and IHSMarkit's expectations that new export records will be set. Thus, the inventory and days of disposition forecast has been updated to show lower levels similar to those witnessed last year. The lower inventory views for the winter also led IHSMarkit to increase their views of the propane to crude ratio in the winter months to match the large spikes in price similar to those witnessed last 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.