High propane production, elevated inventory mark 2022-23 winter’s end

U.S. production of propane from October 2022 through March 2023 reached record highs, according to U.S. Energy Information Administration (EIA) weekly data.

EIA estimates that propane production during that stretch averaged 2.4 million barrels per day (bpd), up 14 percent (295,000 bpd) from the previous five-winter average. 

Despite high levels of propane exports, the high production and modest heating demand increased propane inventories. As of March 24, U.S. propane inventories were 56.2 million barrels, up 67 percent (25.1 million barrels) from the same week last year.

The high propane inventories led to a forecast decline in average winter propane prices. In its March winter fuels outlook, the EIA expected propane prices to average $2.71 a gallon for the 2022-23 winter, down 4 percent (10 cents a gallon) from its October forecast.

Less consumption due to fewer-than-expected heating degree-days and declining fuel prices also reduced EIA’s forecast expenditures for propane and heating oil.

Here’s a look at PADD activity, based on a March presentation by RBN Energy’s Todd Root to the Propane Supply & Logistics Committee of the National Propane Gas Association, and Canada:

PADD 1

East Coast propane exports, destined primarily to Europe, were an area of concern from a supply standpoint in the middle of last year, reaching about 180,000 barrels per day in June, says Todd Root of RBN Energy. But they moderated in October as the heating season began, allowing inventory levels to stay at healthy levels for much of the winter. Several marine cargoes imported into the East Coast helped support inventory levels, Root adds. “PADD 1 inventories look very good, and we expect them to stay at the top of the [five-year] range,” he says. “We do expect exports to pick up and [inventories to] move back into the middle of the range as we move through the summer.”

PADD 2

Canadian propane imports by rail have trended downward over the years, and “we expect that to continue with the increased domestic demand in Canada and the increased exports overseas from their terminals,” Root says. RBN projects inventories above the five-year range, at least until mid-year.

PADD 3

Propane inventories are high, but RBN Energy expects exports to remain strong. “The [arbitrage] is going to dictate that. It’s going to be about economics,” Root says of exports. The pull from Asian markets has been robust.

PADDS 4-5

RBN Energy estimates propane inventory about in the five-year average range. But while the forecast for PADD 4 hovers in the middle of that range, PADD 5 drops to the lower end as it continues to recover from refinery issues since late 2022. “We haven’t fully recovered; 80 percent utilizations compounded the problem from a supply perspective,” Root says.

Canada

Plains Midstream Canada, a subsidiary of Plains All American, is exploring the expansion of its Fort Saskatchewan facility with strategic partners. The expansion would leverage existing infrastructure and add 50,000 barrels per day of C3-plus fractionation capacity while maintaining the flexibility to deliver a propane/butane mix to Plains’ fractionation facility in Sarnia, Ontario, Canada.

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