In the Know: Heating season expectations

April 19, 2018 By    

In the Know is a monthly partnership between LP Gas magazine and Propane Resources. Our focus this month is on this past heating season, addressed by supply expert Tony Botts.

Q: Did the winter live up to the expectations of most retailers?

A: Retailers across the country saw much-needed cold weather this past winter, which eased some pain from the past two years. Many areas saw a significant bump in heating degree-days from last year. Pipelines experienced allocation through much of January and transportation was a constant struggle, leading many retailers to believe we had an above-average winter.

However, the data shows we still fell below the 30-year average for heating degree-days throughout parts of the country. What was missing were sustained periods of cold weather. Though it helped move gallons, most of our demand was packed into a 30-45-day period.

Many traders and suppliers were troubled by the behavior of market prices. Despite lower-than-average heating degree-days, we saw prices in Mont Belvieu breach $1. Inconsistent exports most likely prevented us from going higher than that. Off-hub prices soared. Parts of Ohio, the Northeast and many other terminals and supply points saw prices rise to painful levels. Factors like higher export capacities pressured the market and drove volatility. Don’t expect those export capacities to decrease anytime soon.

Retailers should appreciate the uptick in demand from previous winters, but should also take note of what we saw this year. Volatility continues to whipsaw the market, and the threat of another warm winter should motivate retailers to eliminate as much risk as possible when it comes to managing supply.

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