U.S. propane stocks are high, 33% over the 5-year average. Year-to-date propane exports are at a robust 1.6 MMb/d, well above the 1.4 MMb/d shipped out in 2022. Increasing propane production must be driving the growth in inventories and exports, right? Nay! Propane production is actually down, falling 9% from September 2022 to December, and even with meager growth this year is still 3% below the September high. So where are the propane export and inventory barrels coming from? And what does this mystery reveal about the trajectory of propane production over the next year or two? In today’s RBN blog, we do some sleuthing and come up with some answers.
This is not the first time propane markets have confounded our production models. Back in the summer of 2020, we were trying to get a handle on how propane production was recovering from the COVID meltdown that spring. As we discussed in Now You See It, Now You Don’t, the problem was that the EIA’s weekly production numbers (modeled from propane output from fractionators, plus propane and propylene from refineries) can differ significantly from the same agency’s monthly statistics (based on EIA forms filled out by gas processors and refineries — but published two months in arrears). It was a big problem at that time, and the inconsistencies between the numbers were driving us nuts, so we developed models that estimate “real” propane production for the most recent two months, then use that to project propane production for the rest of the year in our U.S. Propane Billboard Monthly report.
In the 2023 propane mystery, the weekly vs. monthly data issues do contribute to the whodunnit but are not a significant factor in the production disparity. They just make it a little more complicated to figure out what the data is telling us.
To make sense of that disparity, we’ll focus on the geographic footprint of NGL production that has by far the most impact on propane supply, demand and exports: the Gulf Coast, or PADD 3 in EIA parlance. Over the past five years, PADD 3 has been responsible for about 75% of propane production growth in the U.S. You would think that propane production moves in tandem with crude oil and natural gas production since all three hydrocarbons come out of the same hole in the ground — and you’d be right, most of the time. But sometimes — like over the past few months — there can be a disconnect.
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