US: Global outlier in propane export market

Buss

Understanding the ebb and flow of the U.S. propane export market is vital for propane retailers, says JD Buss of Twin Feathers Consulting, who spoke at the Northeast Propane Show in August.

One need only to follow the money to see the financial motivation for companies to move barrels away from the U.S. market area.

“What we see are a lot of benefits to selling exports versus selling retail,” he says, noting the pivotal year of 2015 when U.S. propane export volumes were greater than domestic retail demand.

The United States exported more than 320 million barrels of propane in 2017. “We’re on pace for this year to surpass 2017,” Buss says. Nearly half of that volume went to the Far East, which has accounted for 42.7 percent of total U.S. propane exports since 2015, he adds.

With a backwardated price curve, which shows a lower price into the future, the trading hub of Mont Belvieu, Texas, favors just-in-time inventory to fill vessels instead of long-term storage or meeting retail demand.

“This is a clear opportunity to sell two years out to your customer base,” Buss explains. “You can use the backwardated forward price market to your benefit.”