Calling on propane inventories

Trader’s Corner, a weekly partnership with Cost Management Solutions, analyzes propane supply and pricing trends. This week, Mark Rachal, director of research and publications, discusses the current call on propane inventories heading into the winter.

Catch up on last week’s Trader’s Corner here: How distillates impact propane retail operations

Propane demand has finally reached a level that requires a call on the record inventories that accumulated in the United States heading into this winter.

It looks like inventories hit their peak at 106.094 million barrels during the last week of October. The Energy Information Administration reported a 1.128-million-barrel draw for the week ending Nov. 21. Inventory had been essentially unchanged the prior week with just a 41,000-barrel draw.

Chart 1 is the total propane demand for 2025 compared to the previous two years. For the week ending Nov. 21, demand eclipsed last year’s level. Demand was above last year’s level most of the year due to high export rates. However, overall demand was weaker than normal from mid-September through the end of October, which brought total demand down to below both 2023 and 2024 levels.

Domestic demand has finally kicked in, which is the reason calls on inventory have now become necessary.

Chart 2 breaks total demand into its subcategories of domestic and export. Export demand has dipped from recent highs but remains at the upper end of its range for the year. Domestic demand has recently jumped from its lagging levels.

There are prospects for temperatures to be below normal for much of the nation during the next couple of weeks.

Chart 3 from the National Oceanic and Atmospheric Administration shows that temperatures are likely to be below normal for much of the nation from Dec. 1-5.

It looks like conditions are now in place with export demand holding up and domestic demand finally kicking in to have sustained draws on propane inventories until domestic demand starts tailing off at the end of winter.

No matter. Propane production just hit a new record at 2.911 million bpd. Further, propane fractionation was strong enough last week that even though overall propane inventories declined, that segment of inventories that are fractionated and ready for sale increased by 83,000 barrels to 64.1 percent of total inventories. Overall inventories declined, while ready-for-sale inventories increased, meaning fractionators are working harder. Also, refineries were running at 92 percent of capacity last week, which is exceptionally high, meaning that they are contributing a little more to supply as well.

We are finally on the other side of the inventory mountain and are now descending. Unless temperatures turn unseasonally mild again or exports tumble, inventories will continue to decline. But unless both domestic and export demand remain exceptionally high over the next four months, inventory levels should be plenty high enough at the end of the decline.

Charts courtesy of Cost Management Solutions.

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