Recently released data from the National Energy Board of Canada shows inventory has moved slightly above the five-year average and is nearing where it was at this time last year.
Most of this year, Canadian inventory has been running right along its five-year average. That has been in stark contrast to the high inventory position between January and June 2015. Canadian producers were aggressive in bringing that surplus supply down last year and have kept it down since July 2015.
The aggressiveness of Canadian producers has paid dividends for them in improving propane values, especially in western Canada. In July 2015, Edmonton propane posted a monthly average of just 2.42 cents per gallon. In July 2016, Edmonton propane averaged 20.58 cents. That is a 748 percent increase year-over-year.
Prices at Canadian hubs have easily outperformed in year-over-year gains compared to their competing hubs in the United States. Edmonton generally competes with Conway for market share. Conway managed a 32 percent increase from July 2015 to July 2016. Sarnia gained 30 percent in value compared to its chief rival Mont Belvieu, which had a 16 percent gain.
Through July, Canada had an inventory position just 7 percent higher than its five-year average. Regionally, western Canada inventory levels (click chart above to enlarge) are 2 percent below the five-year average and eastern Canada inventory levels are 19 percent above the five-year average. From a producer/seller standpoint, that number compares favorably to inventory conditions in the United States. Overall, U.S. propane inventory is 35.6 percent above its five-year average. Conway inventory is 13 percent higher and Gulf Coast inventory is 49.7 percent higher.
As winter nears, Canadian producers are well positioned to at least hold and likely improve values relative to their U.S. counterparts. Assuming average to above-average winter demand in Canada, the need to push excess supply out of local markets will be greatly diminished.
The U.S. retailers that enjoyed the aggressiveness of Canadian marketers taking care of their inventory overhang last summer have not seen the same “fire sale” prices this summer. Canada’s inventory positions heading into winter would suggest U.S. retailers will see few bargains from Canadian suppliers this winter
One must give credit to Canadian producers/marketers for their boldness in getting ahead of the bearish fundamental conditions and putting themselves in what appears to be a far better marketing position for this winter.
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