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Resource network expands to keep up with supply changes

March 19, 2018 By    

As the U.S. propane market continues to link up with international markets, changes are taking place on the supply horizon.

These changes are related to production and distribution trends, import and export markets, and prices. Just last week, we reported how U.S. propane exports have helped balance markets and relink U.S. propane prices with Brent crude oil and international propane prices.

The evolution of the propane supply environment is the motivation behind a new supply section that our print subscribers will enjoy on a monthly basis, starting this month with our redesigned issue. We’ll carry that content over to our website – and make it interactive – so our digital readers will have access to it as well.

Our goal with this new section is to report important supply news, share trends that help retail propane operations, and provide best practices that retailers can put to use at certain times of the year.

The propane industry has a lot of savvy leaders on the supply side. We are fortunate to have access to some of these experts, as well as to other resources, who can help us understand this changing landscape so we can report back to you. The nature of these propane supply dynamics, especially happening now on a global scale, ultimately affects your operation.

Propane supply hits

A lot has happened on the propane supply side as we wrap up the winter heating season.

• The Federal Motor Carrier Safety Administration issued and then amended a regional emergency declaration for several western states this month to keep propane and other heating fuels flowing to their needed destinations. Read the latest details here.

• Also this month, the Pennsylvania Public Utility Commission (PUC) ordered Sunoco Pipeline LP to temporary suspend operations of the Mariner East 1 Pipeline over safety concerns. Mariner East 1 is an 8-in. diameter natural gas liquids pipeline used to transport propane, butane and ethane from the Marcellus and Utica shale areas in western Pennsylvania, West Virginia and eastern Ohio to destinations in Pennsylvania, including the Marcus Hook industrial complex on the Delaware River, where they are processed, stored and distributed to local, domestic and waterborne markets. The PUC initially authorized an emergency order after sinkholes developed near the pipeline in Chester County, Pennsylvania. The PUC wants to ensure the integrity of the pipeline through testing and analysis before it’s placed back into service. One midstream company representative and propane supplier told us the shutdown is backing up ethane and propane into the Marcellus and Utica shale region, causing a temporary oversupply in the local markets. The timing of the pipeline’s return to service isn’t clear. Read the the PUC’s press release here.

• The National Propane Gas Association, in conjunction with IHS Markit, produces a monthly propane inventory report. In the February report, propane days of disposition reached critical inventory levels of 19.8 and eventually fell below 18 days following elevated levels of exports. U.S. propane inventory reaches critical levels when days of supply fall below 20, IHS Markit says. It defines days of supply as inventory at month’s end, divided by demand plus exports. Prices at Mont Belvieu reacted to the fall by increasing from 73 cents per gallon to more than $1 per gallon, according to the report. Higher prices would potentially impact propane export economics. If exports fall based on arbitrage economics, IHS expects these lower exports combined with higher supply – from a recovery in U.S. crude production – to lead to well-stocked inventories and lower prices this spring and summer.

• The value of U.S. energy exports, including propane, to Mexico has exceeded the value of U.S. energy imports from Mexico, the U.S. Energy Information Administration (EIA) reports. Energy trade between Mexico and the United States has historically been driven by Mexico’s sales of crude oil to the United States and by U.S. exports of refined petroleum products to Mexico. As the United States has reduced crude oil imports from Mexico, the trade balance has shifted. Petroleum products such as finished motor gasoline, distillate fuel oil and propane account for most of the value of energy exports from the United States to Mexico. In 2017, Mexico was the destination for more than 1 million barrels per day (bpd) of petroleum products, up from 880,000 bpd in 2016. This level was 24 percent of all petroleum products exported from the United States. These exports were valued at more than $23 billion in 2017. Read EIA’s full report.

In case you missed it…

Finally, here are some notable headlines from supply issues on which we reported in recent weeks:

About the Author:

Brian Richesson is the editor in chief of LP Gas Magazine. Contact him at or 216-706-3748.

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