Clash of the titans: Propane production and exports

April 29, 2024 By    

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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, looks at propane production and the balance of propane supply and demand.

Catch up on last week’s Trader’s Corner here: Inventory build resets market

Behold, be warned, take heed – a battle has ensued. Titans of the propane industry have locked horns, engaged in mortal combat. Last week, we reported that U.S. propane production set a record at 2.735 million barrels per day (bpd). This week, we can report that the production level was child’s play. The titan added 88,000 bpd last week to raise the total to 2.823 million bpd.

Chart 1: US Propane/Propylene Production

Chart 1: US Propane/Propylene Production

The other source of U.S. propane supply: imports from Canada. It is, at best, a squire in this epic battle between propane supply and demand.

Chart 2: Total US Propane Imports 2019 Forward

Chart 2: Total US Propane Imports 2019 Forward

Last week, propane imports were a paltry 91,000 bpd.

Imports have been trending lower as the power and might of the titan have grown. Still, it is one of the good guys adding to the abundance of sweet, beautiful propane molecules.

But there is a dark and sinister force lurking. It is a titan to be sure, but one that would take our domestic life’s blood without a penitence of remorse. Propane exports! Dah, dah, DAAAH!

The titan also set a record this past week.

Chart 3: Total US Propane Exports 2019 Forward

Chart 3: Total US Propane Exports 2019 Forward

U.S. propane exports surged 760,000 bpd to a record 2.335 million bpd. As Chart 3 shows, it is an unpredictable, strange, foreign creature. It is so undisciplined that we had to put trend lines on its chart to be able to track its doings and compare them to the past.

Despite its enigmatic nature, it is still a dangerous and dark force facing our hero, production, and its squire, imports. With its surge this past week, the titan of exports left only 439,000 bpd of propane for domestic use despite the gallant efforts of our heroes.

Of course, we must share that paltry sum with our pesky cousins, the petrochemical industry. In the end, it appears we were only left with around 150,000 bpd of non-petrochemical domestic demand, relegating us to near insignificance and approaching the lowly state of propane imports. Gone are the days when companies sent their envoys to our doorstep, offering gifts in desperate attempts to win our favor.

Oh, for the days when we sat upon the throne commanding the room, our shield and sword representing all that is right and good in the world, quick to respond to damsels in distress and adeptly defending our market share against competitors that have no honor. OK, so our sword and shield still represent those things; it’s just that the knights in shining armor don’t seem to get the same billing they once did.

But take heart, my friends. The good titan production is likely to be steadier and more dependable than the evil titan exports. Domestic demand will come back, and we will savor a larger portion, even after taking care of the cousins. We will defend our honor – there is no doubt of it.

All charts courtesy of Cost Management Solutions

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