U.S. propane inventories took off like a rocket in May. As shown on the left-hand chart below, total U.S. propane/propylene inventories increased by about 12.5 million barrels for the 4-week period in May 2023 (red bar), which is ~5 million barrels more than the average increase for the period (green bar). The build was the largest on record for the month according to available historical EIA data. The right-hand chart below shows the monthly propane EIA inventory data for May 2011 – 2022 and our estimate for May 2023. Once again, May 2023 (red bar) comes out on top with the largest build. As you might expect the primary culprit driving inventories up is lower exports. Total U.S. exports in May were down 97 Mb/d from April and 57 Mb/d below the 2023 year-to-date average. However, exports during the month were still 160 Mb/d higher than in May 2022 while gas plant production was only up about 110 Mb/d year-on-year. So why is the build this year so much larger than last May? Part of the increase in inventories is likely due to lower domestic demand. But we believe the main reason is higher production and that the EIA weekly data is understating gas plant supply.
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What's Price Got to Do with It - High Propane Prices Fail to Put the Brakes on Exports
The high-demand season for propane is just around the corner: crop drying, then winter heating demand. This is when propane marketers make most of their money; so under normal circumstances it’s a happy time, when all participants across the supply chain are making last-minute preparations for the season of peak propane demand. But this year is different. There is palpable concern in the market about the level of inventories available to meet demand, and the possibility that propane could be in short supply. How could this be? As we have covered many times in the RBN blogosphere, U.S. propane production is more than double domestic demand. So how could a shortage possibly happen? The answer is pretty simple: exports. The U.S. exports more of its propane production than it uses here at home. This year the domestic market needs more barrels, so all that needs to happen is for U.S. prices to increase enough to shut off exports, right? Wrong. Propane prices have been spiraling up all year, and August prices are higher than they’ve been since 2013. But exports are still running strong, and so far, inventories are not building fast enough. In today’s blog, we’ll look at the drivers behind this seeming market aberration and consider why the upcoming winter season looks like uncharted territory for propane marketers.
One Day Is Fine and the Next Is Black - Stock Levels Whipsaw the Propane Market, Part 2
During the spring, summer and fall of 2016, U.S. propane inventories grew much more slowly than they did in the same period in 2014 and 2015, in part due to fast-rising exports. The situation isn’t dire––propane stock levels are relatively high as the winter of 2016-17 really kicks in, largely because last winter was a mild one that left inventories in good shape when the 2016 stock-building period started. But even-higher exports and the possibility of a “real” winter this time around raise the specter of an especially big drop in stored volumes over the next three months. Today we assess what the combination of higher exports and even an average winter could mean for propane inventories.
Now You See It, Part 3 - U.S. Propane Prices Spike; December Exports Soar to All-Time Highs
It’s been a wild and woolly December in the U.S. propane market. The Mont Belvieu propane price is up by almost 40%, blasting past 70 c/gal on Friday — a level not seen since February 2019, when WTI at Cushing was trading at $57/bbl, $8/bbl above where that price sits today. Is it simply cold weather goosing demand? Sure, that’s one factor. But it’s really all about exports. Just as 2020 cold weather finally arrived in U.S. propane country, exports hit the highest levels ever recorded. December Gulf Coast export volumes — 92% of the U.S. total — are up 21% over last month, and 39% above December 2019. So both international and domestic demand are pulling hard on supplies at the same time. No wonder propane prices are soaring. We started this series on winter 2020-21 supply/demand in late November by suggesting that there could be a few gotchas still out there that were not being reflected in the forward propane market. Well, we’ve now seen one of those gotchas. But there’s a lot of winter left to go — in fact, the official start of winter is this morning! Today, we review what’s happened so far in propane markets, and what could be coming next.
