Strong Waterborne Imports Support East Coast Propane Market

The leaves have already fallen off New England’s trees, the first snow has come and gone, and the six-state region is preparing for another long, cold winter — this time with no Tom Brady and little hope that their beloved Patriots will make it to the playoffs. There is at least some good news, though: record volumes of propane have been railed or shipped into New England and put in storage, which should help to ensure that the many homes and businesses that depend on the fuel for space heating will stay warm. Today, we discuss propane supply and demand in the northeastern corner of the U.S., including a look at SEA-3 Newington — New England’s largest propane storage and distribution center, which rails in the fuel from the Marcellus/Utica and Canada and imports and exports propane by ship.

It may be hard to believe, given the furnace-like temperatures that many of us have been dealing with the past few weeks, but the 2023-24 propane heating season is on the horizon — its official start is October 1, only seven weeks away. To quote Bill and Ted from their Excellent Adventure movie franchise, it could be argued that, for the U.S. propane market, “The best place to be is here. The best time to be is now.” Production is at or near an all-time high — so are exports. Propane inventories are well above their five-year average, which should help ward off winter-supply concerns. And propane prices? They’re up from where they were a few weeks ago, but only in the 70-cents/gal range, well below the $1/gal-plus levels that were the norm between Q3 2021 and Q3 2022. The temptation may be to yell, “Party on, dudes!”, but as we discuss in today’s RBN blog, the reality is, the propane market is an ongoing and unpredictable adventure, and you never know for sure what’s ahead.

The EIA report on propane inventories that came out yesterday was a shocker. This time of year, stocks are supposed to be building toward the levels needed to get U.S. propane markets through the winter season. But the numbers released on Wednesday showed an inventory decline, resulting in inventory balances now below the five-year minimum. The culprit, of course, is exports, with 1.4 MMb/d of them reported last week, a 17% gain over the year-to-date average. And these cargoes to overseas markets are happening even with propane prices in the stratosphere: more than double where they stood this time last year. Propane marketers were hoping that higher prices would slow down exports, but so far that is not happening. In today’s blog, we examine U.S. exports of LPG — propane plus butane — and discuss what may be ahead for these markets.