US propane exports fall as days of supply continue to recover

June 26, 2017 By    

The changing nature of today’s propane supply and pricing picture involves tracking the status of U.S. propane exports. It’s important for propane retailers to know the latest trends that could impact their access to propane and their ability to serve the domestic market.

LP Gas attended Propane Days, the industry’s lobbying event, last week in Washington, D.C., where the topic of propane exports was discussed among National Propane Gas Association (NPGA) members.

U.S. propane exports have fallen significantly in the last couple of months as the arbitrage to Asia has closed, Keefer Douglas of IHS Markit reported in the nation’s capital. Douglas says 24 export cargoes were canceled or deferred in May and June due to economics.

Even so, Douglas says, the propane industry began June with the lowest U.S. days of supply in recent history, due to low PADD 3 (Gulf Coast) inventory. The industry has been recovering from a critical 18.6 days of supply to end April – about 24 days fewer than at the same time last year – as exports remained strong in the first quarter, according to NPGA’s May propane inventory report. For the first time since 2011, NPGA adds, the U.S. continued to draw propane into April.

With the added export component having the potential to greatly influence U.S. supply, NPGA is urging members to closely monitor inventory in August and September as the winter heating season approaches.

IHS Markit expects propane production to grow over the next several months as the U.S. ramps up crude production. If production doesn’t grow, Douglas notes, U.S. propane inventory will be lower than IHS’ current base case forecast.

Propane Days

Propane delivery infrastructure was one of four issues discussed last week on Capitol Hill.

While a number of infrastructure improvements have been made since the 2013-14 winter, more actions can be taken to help propane marketers deliver fuel to customers without interruption, according to NPGA. Industry leaders called on lawmakers to make three infrastructure-related changes.

Ensure more accurate propane supply data from the U.S. Energy Information Administration (EIA). NPGA is pushing for EIA to include export volumes in its days-of-supply calculations, giving policymakers and the industry the most accurate supply picture possible.

Hours-of-service waivers. The association would like to see policymakers proactively grant weight limit and hours-of-service exemptions on a regional basis. This would help the industry avoid playing catch-up after a supply chain disruption, NPGA says.

Jones Act waiver. Though calling it an extraordinary measure, NPGA says allowing ships to take propane from Gulf Coast storage facilities to needed areas on the East Coast and New England would be extremely helpful in emergency situations. The Jones Act calls for only American-made ships, staffed by U.S. citizens and sailing under the U.S. flag, to transport goods from one U.S. port to another, and a Jones Act-compliant propane transport ship does not exist. Allowing relief from the Jones Act in certain situations would spell relief for the industry.

Supply news and notes

• Tom Van Buren of Ferrell North America, outgoing chairman of the Propane Education & Research Council, says the industry is updating and expanding a 2015 infrastructure study to reveal changes in how, when and by what means propane is moving through the supply chain. IHS Markit and RBN Energy have been tasked with the project.

• Van Buren tries to put the supply situation into perspective when he says, “We’re always going to have supply and logistics challenges. What do we have control over? What can we do better for marketing and awareness?”

• For those of you in the Southeast, here are a couple of supply-related developments:

• Read our June column, titled “Propane supply situation gains industry’s attention,” which covers this year’s propane inventory levels, as well as a supplier’s perspective on the U.S. supply picture.

• Don’t forget to send us your company’s news and your story ideas. You can email me at brichesson@northcoastmedia.net or call 216-706-3748.

Brian Richesson

About the Author:

Brian Richesson is the editor in chief of LP Gas Magazine. Contact him at brichesson@northcoastmedia.net or 216-706-3748.

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