Until just a few years ago, the rise and fall of U.S. propane inventories each year was driven in large part by winter weather: the colder the temperatures in the major propane-consuming areas, the bigger the draw on stocks. Things have gotten much more complicated lately, though, thanks to a combination of rapid NGL production growth, a generally booming propane export market, and the vagaries of petchem margins. Now, to get a handle on propane stocks, you not only need to be able to forecast the weather, you also need to monitor international propane arbs and steam cracker economics — oh, and crude prices too, because they have a significant effect on NGL output and propane supply. Today, we discuss the many factors that impact propane inventories and prices in this sometimes chaotic market.
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.
U.S. propane inventories rose by an impressive 55 million barrels (MMbbl) during the spring/summer/fall of 2014, and the mild winter of 2014-15 left propane stocks at well-above-normal levels the following spring. Another impactful inventory build—53 MMbbl—occurred during 2015’s March-to-November stock-building season, leaving propane stocks at a record 104 MMbbl as the freakishly mild winter of 2015-16 started. But propane inventories grew much more slowly through the spring/summer/fall of 2016, due in part to rising exports, and—while stocks are high as this winter begins—even-higher exports and the possibility of real winter weather raise the specter of an especially big drop in stored volumes. In today’s blog we begin a series on the significance of propane inventory levels with a look at why propane stocks rose so much in the 2014 and 2015 stock-building seasons.