Propane News

Weekly Inventory Results

04/11/18-U.S. propane/propylene stocks decreased by 0.4 million barrels last week to 35.8 million barrels as of April 6, 2018, 10.3 million barrels (22.4%) lower than the five-year average inventory level for this same time of year. East Coast inventories decreased by 0.2 million barrels, Rocky Mountain/West Coast and Midwest inventories each decreased by 0.1 million barrels, while Gulf Coast inventories increased by 0.1 million barrels. Propylene non-fuel-use inventories represented 7.8% of total propane/propylene inventories.

NPGA Propane Inventory Report Summary

June 2017

June 2017 data shows that the United States propane inventory build is accelerating.  The month of May saw a sharp fall in export demand due to a closed arbitrage as Japan inventories reached required minimal levels.  The fall in exports helped lift US inventory from a critical inventory at 18.6 days of supply at the end of April to 27 days of supply at the end of May. It can be deciphered from the chart below contained in the Snapshot file from the NPGA Trend Report that Weekly inventory for the US has started to outpace inventory from 2013.  However, it should be noted that even with the aggressive builds, the US is at extremely low days of supply to begin June compared to previous history. Thus it will be extremely important to monitor propane inventory builds through the spring and summer months to determine the upcoming winter's inventory situation.  Although the forecast is early, IHS sees the possibility of low days of supply in the autumn months, before the start of the winter season.  It should be noted however, that the low inventory situation we see today is being driven by PADD 3 and not PADD 1 and 2 as they are both near average stock levels today.

Exports were the primary driver of the sharp draw down of propane inventory this winter.  IHS believes that exports will fall substantially over the next several months as the arbitrage has crashed.  We are seeing indications of this expectation as 24 export cargos have been canceled or deferred in May and June thus far. This combined with seasonal declines in residential/commercial demand should lead to an acceleration of propane inventory builds over the next few months. IHSMarkit expects propane supply from gas plants to resume growth as higher crude prices lead to a new rig deployment and a resumption of new associated production. 

For the summer, IHS expects that propane exports will be much lower than records set during the past winter.  However, due to new terminal capacity and contracts, it is likely that exports will be slightly higher this summer versus last and this scenario is reflected in the latest May trend report.   

For the winter of 2017-2018, it will be important to closely monitor inventory levels in August and September.  Unlike the past several winters, the winter of 2016-2017 drew inventory down to critical levels.  IHS propane supply forecasts are highly dependent on associated crude oil production growth over the next several quarters.  If crude prices fall and propane production remains flat, inventory may not be replenished to levels necessary to meet expected export demand during the winter of 2017-2018.  This could lead to critical inventory levels earlier in the winter months than witnessed this winter.


 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.