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THIS WEEK'S TOPIC:
PROPANE INVENTORY
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State of US propane inventory and its impact on pricing
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U.S. propane inventory ended 2016 at 84.123 million barrels after dropping 2.746 million barrels in the final week of the year. Inventory at the end of 2015 was 96.341 million barrels. Inventory closed 2016 at 12.218 million barrels, or 12 percent below the 2015 record highs. Inventory remains 22.4 percent above the five-year average, seemingly in a good position for the remainder of this winter.
However, that does not mean a firmer pricing environment cannot develop.
During the final three months of last winter, propane inventory declined 35.508 million barrels. That same rate of decline this year would put inventory at 48.615 million barrels at the end of the drawdown period. The last five winters have ended at an average inventory position of 44.556 million barrels.
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However, inventory ended the winter of 2014-15 at 53.744 million barrels and the winter of 2015-16 at 62.5 million barrels. At this point, inventory is likely to finish this winter below both of those years. If inventory drops significantly below those positions, the market may begin to panic. At the very least, inventory well below those numbers would create a firmer pricing environment for next winter's supply.
Projecting last year’s rate of decline into this year makes it seem like inventory is in a strong position. However, the difference in the rate of decline in inventory between the last two Decembers makes one wonder if the inventory drawdown for the remainder of this winter won’t be stronger than last year. Inventory dropped 10 million barrels more in December 2016 than it did in December 2015.
Though inventory is likely too high for supply issues to develop this year, we could still face a firmer pricing environment by the end of this winter if the rate of inventory decline matches or exceeds last year for the rest of this winter. Over the last few weeks, inventory has been on a steeper downward trend than seen last year, so that possibility is definitely present.
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WHAT IS COST MANAGEMENT SOLUTIONS?
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The Propane Price Insider is an email service that provides:
- Three daily price Flash Wires
- Periodic option quotes
- Wednesday inventory data updates around 11 a.m. ET
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Evening report with executive summary, weather maps and complete review of energy prices that are based on propane's Btu equivalent
For a free 10-day trial subscription by email, sign up online here or call 888-441-3338.
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Cost Management Solutions LLC (CMS) is a firm dedicated to the analysis of the energy markets for the propane marketplace. Since we are not a supplier of propane, you can be assured our focus is to provide an unbiased analysis.
Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.
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Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.
We offer:
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Detailed market recommendations on hedge and pre-buy entry points
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Prompt market execution of hedging strategies
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Supply cost analysis and recommendation as to effective hedging strategies
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Large volume consideration when we place your hedges
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GOT STORY IDEAS? Email Brian Richesson, Editor in Chief
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