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Trader's Corner

This week’s Trader’s Corner looks at propane inventory in North America.

October is here, marking the beginning of the heating season. In this Trader’s Corner, we will tour North America and see how inventories of the product we sell are looking as winter begins.

To be sure, the beginning of October is generally not the high-water mark for propane inventory. That generally occurs later in the month. Still, we can get a good feel for how things stand as we head into a busy season. Besides, with the shutdown of many U.S. government offices, it could be a while before we get another update from the U.S. Energy Information Administration.

We are going to show charts of regional inventories in the United States, broken down by Petroleum Administration for Defense Districts (PADDs). Inventory for PADDs 4 and 5 are combined. Below is a map of the PADDs for reference:

We will start in the East and work our way across the nation. To end, we will look at the total U.S. inventory chart and Canadian inventories to give you an idea of the big picture for all inventories that will contribute to filling U.S. demand. In each of these charts, the gray area is the high and low range over the last five years. The green line is the five-year average inventory position; the blue line is 2012; and the red line 2013. We won’t make a lot of commentary on the individual charts; they should speak for themselves.

The Canadian inventory data lags the U.S. a bit, but it is certainly looking as if it will be average to above average.

There has been much worry that propane exports and petrochemical demand would have propane supplies short this winter. That may still be the case, but they will be at average levels to start the winter.

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Propane continued higher, shaking off an above-average inventory build. We had gone to bullish early week, but a slip on Friday will have us neutral to start the new week.

Monday: Propane carried over the momentum built the final two days of the previous week. Crude fell, but it did not prevent a modest gain in propane. Worries about the U.S. government budget impasse dominated crude markets.

Tuesday: Propane opened October with strong gains at both major U.S. trading hubs. Conway saw strong trading volume to open the new month. Crude prices drifted lower as investors became cautious, with fiscal issues in Washington the key headwind.

Wednesday: A 1.570-million-barrel build in propane inventory slowed the upward momentum in propane prices. Crude surged higher on a falling dollar as investors took position to guard against inflation.

Thursday: It didn’t take propane long to shake off the effects of an above-average inventory build reported on Wednesday. Conway completely erased all of the losses from Wednesday and Belvieu kept marching higher. However, crude gave up nearly half of the gain made the previous day.

Friday: A lack of demand for local barrels in Belvieu seemed to set the tone for the day. Prices at both hubs drifted slightly lower. Crude gained despite a strengthening dollar as Tropical Storm Karen supported prices.

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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.

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