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THIS WEEK'S TOPIC:
PROPANE SUPPLY
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Falling natural gas production affects propane supply
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Nearly 80 percent of U.S. propane production came from natural gas processing last year. Natural gas production is the engine that drives propane supply.
It is quite easy to see from the chart above why growth in propane supplies has slowed so much. In fact, U.S. propane supply was lower in the fourth quarter of 2016 than in the fourth quarter of 2015.
U.S. marketed natural gas production in January 2017 was 2.343 million cu. ft. Production was at 2.424 million cu. ft. in January 2016.
Drilling for natural gas is on the upswing, but it is light years away from the peak. The highest number of active natural gas drilling rigs was 1,606 in September 2008. That dropped to just 81 in August 2016. Last week, there were 160 natural gas rigs actively drilling in the United States.
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Producers are drilling liquid-rich wells, and recovery from wells is improving. Still, the dramatic decrease in drilling has resulted in less natural gas production, and it is likely to take more activity than what is currently taking place to turn the tide. This should put upward pressure on natural gas prices in the short to medium term.
The lighter natural gas production has slowed the growth of propane supply from natural gas processing. We estimate current growth in fuel-use propane supply from natural gas plants at around 45,000 barrels per day (bpd). That is up from last year, but well below the 184,000 bpd of growth between 2014 and 2015.
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WHAT IS COST MANAGEMENT SOLUTIONS?
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The Propane Price Insider is an email service that provides:
- Three daily price Flash Wires
- Periodic option quotes
- Wednesday inventory data updates around 11 a.m. ET
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Evening report with executive summary, weather maps and complete review of energy prices that are based on propane's Btu equivalent
For a free 10-day trial subscription by email, sign up online here or call 888-441-3338.
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Cost Management Solutions LLC (CMS) is a firm dedicated to the analysis of the energy markets for the propane marketplace. Since we are not a supplier of propane, you can be assured our focus is to provide an unbiased analysis.
Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.
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Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.
We offer:
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Detailed market recommendations on hedge and pre-buy entry points
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Prompt market execution of hedging strategies
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Supply cost analysis and recommendation as to effective hedging strategies
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Large volume consideration when we place your hedges
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GOT STORY IDEAS? Email Brian Richesson, Editor in Chief
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