Do You Really Want to Hurt Me? - Western Canada's Propane Balances Look Even Tighter

It wasn’t that long ago that Western Canada was awash in propane, sending the vast surplus for export by railcar to the U.S. That has changed in the past two years as direct exports to Asia opened up and Canada’s domestic demand for propane rose. With supplies becoming tighter, the combined effect with increasing demand spells trouble for higher exports to the U.S. this winter, a time when they are desperately needed. In today’s RBN blog, we explore the current Western Canadian propane market and what might be next in store.

Western Canada is being pulled deeper into the incredible frenzy surrounding U.S. and global propane markets. Driven by an expanding connection to overseas customers, domestic demand that continues to increase, and supplies which have struggled to keep up, Canada’s propane situation is looking eerily similar to that of its southern neighbor. The U.S. market has been under increasing stress to satisfy its domestic and export customers against tight supplies, resulting in some regionally below-average propane inventories only weeks before the onset of the next heating season. Our blog What’s Price Got to Do With It provides a perspective on the current tightness in the U.S. propane market. Western Canada’s propane production has usually been a reliable backstop when U.S. market conditions are as on the edge as they are now, but things may be ominously different this winter, and maybe next year too.

This is not the first time that we’ve blogged about what’s been an ongoing transformation of the Western Canada propane market. Last year, in our three-part series Hold on to Your Hat, we laid out the evolving state of propane balances in Western Canada, and how it pointed to a reduction in railed exports to the U.S., especially into the all-important Midwest (PADD 2), a region reliant on Canadian supplies to backfill winter heating needs. Those railed exports did not turn out to be quite as constrained as we feared last winter, but we think last year’s developments may have just been a warm-up.

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