Weak propane exports offset domestic demand

April 16, 2018 By and    

The U.S. Energy Information Administration (EIA) reported U.S. domestic demand for propane at 1.496 million barrels per day (bpd) for the week ending April 6. That compares to 1.158 million bpd during the same week last year – a 338,000-bpd difference.

The high domestic demand resulted in a 417,000-barrel draw in U.S. propane inventory, while many expected a build. The high domestic demand is offsetting abysmal export activity.

Last week, U.S. propane exports were just 593,000 bpd, the second week in a row with exports below 600,000 bpd. That rate compares to 900,000 bpd for the same week last year.

Low export activity over the last couple of weeks is indicative of a broader trend that developed this winter. For the most part, propane exports have been higher each month than the same month the previous year. In the chart above, the red bar being higher than the yellow bar indicates what has become the typical year-over-year growth in export volumes.

However, exports were lower than the previous year in December 2017. That was the first time since export activity surged that there was no year-over-year export growth during a winter month. The official monthly data for January 2018 was just released and showed exports lower than January 2017. Weekly estimates (brown bars) from EIA suggest exports in February and March could also be lower than the same months in 2017.

With all of the new U.S. propane production, if propane exports do not pick up soon, we will expect to see rather large inventory builds once domestic demand no longer has support from winter weather. Last week’s propane production was 80,000 bpd higher than the same week last year. Growth in production has averaged 138,000 bpd higher year to date in 2018 than in the same period last year.

There has been a marked improvement in April propane values over the last week. Since last week’s Trader’s Corner, Mont Belvieu propane is up around 9 cents. Propane had a lot of support from the rally in crude and the draw on inventory reported last week. However, we have to wonder if these weak export numbers won’t eventually undermine this recent strength.

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