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Click here for a free, 10-day trial of The Propane Price Insider!
Call Cost Management Solutions today at 888-441-3338 for more information about how Client Services can enhance your business or drop us an email at info@propanecost.com.
Trader's Corner
This week’s Trader’s Corner looks at the current state of propane inventory after five weeks in a row of above-average builds.
The past five weeks have generated a remarkable turn in the condition of U.S. propane inventory. In each of the past five weeks, the Energy Information Administration (EIA) reported above-average inventory builds. Some of them have been significantly above average, like the 3.7-million-barrel-build four weeks ago. The result has been to rapidly push U.S. propane inventory near its five-year average.
During the past five weeks, U.S. propane inventory increased 12.6 million barrels, or an average of 2.5 million barrels per week. The average build over this same period during the past five years has been 7.2 million barrels, or 1.4 million barrels per week.
These certainly are the kind of builds in inventory that have been priced into propane since the end of winter, with propane trading under 45 percent of West Texas Intermediate crude.
If you recall, April inventory builds were running below normal and it appeared it would be difficult to build inventory to average levels by winter. The amount that builds needed to improve each week to reach average by winter seemed formidable. But as the chart below shows, builds now only need to be slightly above normal from this point forward to reach average by the onset of winter.
Over the past five years, inventory builds have been 1.2 million barrels per week on average between now and the first of October. Inventory will need to average building just 89,000 barrels per week more than average to hit targets by winter. It won’t take too many more builds like last week’s 2.2-million-barrel-build to take away the shortfall.
At this point, U.S. inventory is well over halfway to the 67.5-million-barrel, five-year average position to start winter. Current U.S. inventory is 42.1 million barrels, leaving just 25.4 million barrels needed to reach the average.
Over the month of June and the first week of July, Enterprise TE Products Pipeline Co. will be working on its propane export facility, which should add even more propane to inventory. As of now, it looks like propane inventory could easily be running at average or even higher by the end of this month.
There is reason for caution concerning propane inventory later in the year. The petrochemical industry has been really light on propane consumption, so there is always the possibility it will consume more. Second, Targa Resources Partners will have added another 2 million barrels per month of propane export capacity by late summer (August or September). The Enterprise export terminal should be back on line the first of July, and we would expect high export volumes from there to follow.
So while it looks as if inventory could be in great shape by the start of winter, we will need to keep a close eye on how it is building and holding up from July forward.
Call Cost Management Solutions today at 888-441-3338 for more information about how Client Services can enhance your business, or drop us an email at info@propanecost.com.
WEEK IN REVIEW
Falling crude prices and building inventory caused downward price pressure to develop for propane. We went into the week neutral since it is the start of a new month, but we believe downside price risk definitely increased.
LAST WEEK'S DAILY HIGHLIGHTS
Monday: Markets closed for Memorial Day.
Tuesday: Propane started slowly the day after the holiday, but managed to gain steam in the afternoon to close higher. Crude was lower because of a positive election outcome in the Ukraine.
Wednesday: Falling crude continued to drag on propane. Crude was seeing heavy profit-taking, as some of the geopolitical premium that had resulted from tensions in the Ukraine was being captured.
Thursday: The EIA Weekly Petroleum Status Report showed another above-average build in propane inventory, sending prices lower despite gains in crude. Crude was higher after a 1.8-million-barrel drop in U.S. gasoline inventory.
Friday: A downtrend for crude was gaining steam on reports by NATO that Russian troops were moving away from Russia's border with Ukraine. Falling crude was keeping a lid on propane prices.
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COST MANAGEMENT SOLUTIONS
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.
Market Information Services
The Propane Price Insider, an e-mail service that provides:
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Periodic Option Quotes
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Wednesday Inventory Data Updates around 11 a.m. ET
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Evening Report with Executive Summary, Trader's/Hedger's Corner, Weather maps and complete review of energy prices that are based on Propane's Btu Equivalent
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For a free 10-day trial subscription by e-mail, sign up online here or call toll-free at 888-441-3338.
Client Services
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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Because of the volume of transactions we place annually, we receive large volume consideration when we place your hedges
Visit us online at www.propanecost.com. Or e-mail info@propanecost.com.
Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.
Dale G. Delay 888-441-3338, ddelay@propanecost.com
Mark Rachal 888-441-3338, mrachal@propanecost.com |
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