Correction from last week’s Trader’s Corner

Last week, we produced a report on the discrepancy between the U.S. Energy Information Administration's (EIA) weekly and monthly inventory numbers. We felt the issue was associated with the difference in propylene shown in weekly and monthly reports. In our report, we expressed concern that EIA might make an adjustment at some point to align its weekly and monthly numbers, which would have likely resulted in a larger-than-expected draw on inventory in its weekly reports.

EIA responded to the article and assured us no such adjustment is forthcoming. EIA changed its hydrocarbon gas liquids reporting table in August 2017. As a result, simply backing out the propylene stocks from the weekly estimates would not match up to the inventory reported in the monthly reports.

EIA reports “nonfuel use propylene stock data collected from bulk terminal facilities only” in its weekly report. Pipeline fill and refinery propylene stocks aren’t included in the weekly report. Therefore, according to the EIA representative, our statement that propylene stocks appear to be understated in the weekly estimates versus the monthly reports is misleading. “The weekly propylene bulk terminal propylene (nonfuel use) number is not the same as the total propylene inventory number,” EIA says.

The bottom line is the propane inventory data shown in the weekly reports is a true representation of inventory levels and we should not be concerned about an adjustment, according to EIA. Because the monthly and weekly numbers are not an “apples-to-apples” comparison based on the reporting methodology, an adjustment is not necessary.

Propane production growth

U.S. propane production from natural gas processing plants jumped in October 2017, according to the latest official data from EIA. Production jumped 31,000 barrels per day (bpd) between September and October 2017.



Year-over-year propane production was up 107,000 bpd, a significant increase from the trend earlier in 2017. From January through September 2017, U.S. propane production from natural gas processing increased an average of 38,000 bpd, with the high being in September 2017 at 74,000 bpd above September 2016.
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Of course, natural gas production is the engine that drives propane production. After starting the year with natural gas production running below 2016, since June production has been higher than 2016.



Production looks like it will continue to surge in the fourth quarter. Natural gas production hit more than 2.5 billion cu. ft. in October 2017, up more than 98 million cu. ft. from September. The October year-over-year gain was about 140 million cu. ft. Obviously, the increase in propane production is a reflection of the increase in natural gas production. Approximately 80 percent of U.S. propane supply comes from natural gas processing, and the remainder comes from crude refining.